Fair Work Ombudsman v Love
[2011] FMCA 671
•31 August 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
FAIR WORK OMBUDSMAN v LOVE and ANOR [2011] FMCA 671
INDUSTRIAL LAW – Fair Work – proceedings commenced under s.718 of the Workplace Relations Act 1966 for the imposition of penalties for the breach of s.346ZD for the failure to make back-payments within a specified period after notification of failure of AWAs to meet the Fairness Test – penalty orders made.
Fair Work Act 2009 (Cth), ss.539, 681, 687, 701
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 ss.11, 13
Workplace Relations Act 1966 (Cth), ss.346, 718, 719, 728
Workplace Relations Amendment (Work Choices) Act 2005
Workplace Relations Amendment (A Stronger Safety Net) Act 2007
Armstrong v Bigeni Contracting Pty Ltd [2008] FMCA 485
Australian and Consumer Affairs Commission v ABB Transmission and Distribution Ltd [2001] FCA 383
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560
BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union (CFMEU) [2000] FCA 1908
Brobbel v S & C Mack Pty Ltd [2008] FMCA 1355
CPSU v Telstra Corporation Ltd (2001) 108 IR 228
Dennington v Pee Cee Pty Ltd [2008] FMCA 79
Fair Work Ombudsman v Essendene Security Pty Ltd & Anor [2010] FMCA 384
Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors [2010] FMCA 252
Finance Sector Union of Australia v Commonwealth Bank of Australia [2005] FCA 1847
Flattery v Italian Eatery t/as Zeffirelli’s Pizza Restaurant [2007] FMCA 9
Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216
Iannella v French (1968) 119 CLR 84
Jones v RWH Parcel Delivery Pty Ltd [2008] FMCA 1153
Kelly v Fitzpatrick (2007)166 IR14
Klousia v KTM Investments Pty Ltd & Anor [2009] FMCA 208
Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurants and Bars [2007] FMCA 7
McIlwain v Ramsey Food Packaging Pty Ltd (No.4) [2006] FCA 1302
McIver v Healey [2008] FCA 425
Ostrowski v Palmer [2004] HCA 30
Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd (1994) 127 ALR 673
Ponzoi v B&P Caelli Constructions Pty Ltd (2007) 158 FCR 543
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Securit-E Holdings Pty Ltd & Ors [2009] FMCA 700
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550
Torpia v Empire Printing (Australia) Pty Ltd [2009] FMCA 853
Transport Workers Union of Australia v Glynburn Contractors (Salisbury) Pty Ltd (1991) 37 IR 313
Watson & Anor v Lee & Anor (1979) 26 ALR 461
Workplace Ombudsman v Securit-E Holdings Pty Ltd & Ors [2009] FMCA 700
Applicant: FAIR WORK OMBUDSMAN
First Respondent: DAMIEN PETER LOVE
Second Respondent: TAMMY LEIGH LOVE
File Number: SYG 2808 of 2009
Judgment of: Lloyd-Jones FM
Hearing date: 29 June 2010
Delivered at: Sydney
Delivered on: 31 August 2011 REPRESENTATION
Counsel for the Applicant: J. Mattson
Solicitors for the Applicant: Bartier Perry
Counsel for the Respondent: L. Wilson
Solicitors for the Respondent: McInnes Legal DECLARATIONS
(1)The First Respondent was involved in (within the meaning of s.728 of the Workplace Relations Act 1966) a contravention of s.346ZD of the Workplace Relations Act 1966 in respect of the employees listed in Annexure “A” to this Judgment.
(2)The Second Respondent was involved in (within the meaning of s.728 of the Workplace Relations Act 1966) a contravention of s.346ZD of the Workplace Relations Act 1966 in respect of the employees listed at Annexure “A” to this Judgment.
ORDERS
(1)Pursuant to s.719(1)(a) of the Workplace Relations Act 1966 the First Respondent pay a penalty of $6,000.00 for his involvement in the breach of s.346ZD of the Workplace Relations Act 1966.
(2)Pursuant to s.719(1)(a) of the Workplace Relations Act 1966 the Second Respondent pay a penalty of $1,000.00 for her involvement in the breach of s.346ZD of the Workplace Relations Act 1966.
(3)In relation to orders 1 and 2, penalties are to be paid to the Commonwealth of Australia within 60 days.
(4)No order as to costs.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEYSYG 2808 of 2009
FAIR WORK OMBUDSMAN Applicant
And
DAMIEN PETER LOVE First Respondent
TAMMY LEIGH LOVE
Second Respondent
REASONS FOR JUDGMENT
The proceedings
1.This is an application filed on 29 June 2009, commenced under s.718 of the Workplace Relations Act 1966 (Cth) (“WR Act”) for the imposition of penalties and other orders under s.719 of the WR Act on persons who breached “applicable provisions” that were binding upon them.
2.On 1 July 2009 the WR Act was repealed by the provisions of the Fair Work Act 2009 (Cth). In respect of breaches occurring prior to 1 July 2009, s.11(1) of Part 3 of Schedule 2 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“T&C Act”) provides that the WR Act continues to apply on or after 1 July 2009 in relation to conduct that occurred before that date. Section 13(1) of Part 3 of Schedule 18 of the T&C Act gives Fair Work inspectors the power to make or continue applications under the WR Act.
3.The application filed on 17 November 2009 which is supported by a Statement of Claim seeks the following orders:
1. A declaration that the first respondent was involved in (within the meaning of section 728 of the WR Act) a contravention of section 346ZD(3) of the WR Act in respect of the employees listed in Schedule A to this application.
2. A declaration that the Second Respondent was involved in (within the meaning of section 728 of the WR Act) a contravention of section 346ZD(3) of the WR Act in respect of the employees listed at Schedule A to this application.
3. An order under paragraph 719(1)(a) of the WR Act imposing a pecuniary penalty on the First Respondent.
4. An order under paragraph 719(1)(a) of the WR Act imposing a pecuniary penalty on the Second Respondent.
5. Any such other order(s) as the Court considers appropriate.
Grounds of application
1. The grounds of the Application are set out in the accompanying Statement of Claim.
Background
4.The Applicant in these proceeding is, and was at all relevant times the Fair Work Ombudsman established by s.681 of the Fair Work Act 2009 (Cth) and appointed by the Governor General pursuant to s.687 of the Act. The Applicant is a Fair Work Inspector by force of s.701 of the Act and is entitled under s.539(2) of the Act to apply to this Court for an order that the Respondent pay a pecuniary penalty for failure to make available records which were the subject of a written request.
5.The Respondents, Damien Love and Tammy Love are husband and wife and were both shareholders in a company called Drymist Holdings Pty Ltd until Mr Love placed the company in voluntary liquidation on 21 August 2009. Drymist Holdings traded as East Coast Investigations and Security or ECI Security. Mr Love had the day-to-day management and control of Drymist Holdings.
6.During the period 2007 to 2008 Drymist Holdings entered into Australian Workplace Agreements (AWAs) with each of their employees and lodged the agreements with the Workplace Authority for approval. The Workplace Authority first notified Drymist Holdings on 3 September 2007 that the ‘Fairness Test’ would be applied to the AWAs. The AWAs did not pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWAs provided fair compensation for the removal or modification of protected conditions in accordance with s.346M of the WR Act. Drymist Holdings was first notified of the fact that the AWAs did not pass the Fairness Test in respect to some of their employees on 8 October 2007 (although it is clear that before this date Mr and Mrs Love had sought legal advice about the appropriate rate of pay required in order for the AWAs to pass the Fairness Test).
7.Drymist Holdings was given the chance to vary the AWAs to pass the Fairness Test which was contained in a letter from the Workplace Authority dated 8 October 2007 which advised that the AWAs lodged in respect of two employees, Craig Nichols and Brian Watt failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWAs provided fair compensation for the removal or modification of protected conditions. A letter stated:
If the varied agreement does not pass the Fairness Test it will cease to operate and you must pay any owed backpay to your employee.
If we do not receive any variation or undertaking from you within 14 days of the date of this letter, the agreement will cease to operate and you must pay any backpay owed to the employee within 14 days of the agreement ceasing to operate.
8.Pursuant to s.346P of the WR Act, following the opportunity to vary the AWAs, the Workplace Authority Director then issued notices to Drymist Holdings advising that the AWAs did not pass the Fairness Test. As a result of the Workplace Authority determining that the AWAs did not pass the Fairness Test, the AWAs ceased to operate. Once the AWAs ceased to operate, Drymist was required to pay their employees compensation pursuant to s.346ZD(3)(b) of the WR Act.
9.
In April 2006, Drymist Holdings had engaged a lawyer (Enterprise Law) to assist it to create AWAs and understand the process. After receiving a letter dated 8 October 2007, Mrs Love contacted their lawyers seeking advice which resulted in that firm sending Mr and Mrs Love a letter containing information about the changes in the law. Drymist Holdings lodged an undertaking to vary the AWAs for the first two employees (Nichols and Watt) within 14 days of the notice dated 8 October 2007.
The Workplace Authority informed Drymist Holdings that the variation also did not pass the Fairness Test and thus the two AWAs (Nichols and Watt) ceased to operate by letter dated
15 August 2008. This letter was received some 14 months after these two AWAs were originally lodged, therefore the two employees had been paid under the AWA terms and conditions for 14 months.
10.Drymist Holdings did not lodge any further undertakings to vary the AWAs for the remaining 20 employees. Once Drymist received the notices of failure to pass the Fairness Test, all the remaining AWAs ceased to operate 14 days later. The average length of time taken for the Workplace Authority to send notices of failure to pass the Fairness Test for the 22 employees was almost one year from the date of lodgement. During that time (the Fairness Test period) Drymist was paying the employees according to the AWAs as lodged and performing contracts based on the AWA rate of pay. A summary setting out the length of time taken by the Workplace Authority to notify Drymist Holdings of the failure of each AWA to meet the Fairness Test is contained in Annexure ‘A’ to this judgment.
The Fairness Test
11.The Fairness Test applies to Australian Workplace Agreements lodged on or after 7 May 2007, that change or remove certain protected employment conditions. It only applies to AWAs for employees earning less than $75,000 per year working in industries or jobs where a federal award usually applies, or where prior to 27 March 2006 a State award usually applied. It also applies if the employees were covered by a former state award or agreement. The Fairness Test was designed to determine whether AWAs provide fair compensation to the employees for changing or removing any of the following protected conditions:
·Penalty rates, including for working on public holidays and weekends;
·Shift work and overtime loadings;
·Monetary allowances for employment related expenses, responsibilities or skills not included in the employee’s rate of pay, and disabilities for performing certain tasks or working in particular conditions or locations;
·Annual leave loadings;
·Public holidays including substituted days and procedures for substitution;
·Rest breaks; and
·Incentive based payments and bonuses.
Mr and Mrs Love’s security business
12.In Mr Love’s sworn affidavit filed in these proceedings, he indicated that he had lived in the Wollongbar area for all of his life and had completed his education to his year 10 School Certificate. He indicated that he has had no formal business training. Between the ages of 16 and 20 he was employed in the security industry in patrol cars and in hotels and clubs as a security officer. When he was 20, he started a small security business based in Alstonville with two casual staff members patrolling the local industrial estate and the main business area but this business was sold after about 8 months. At the same time, he worked at Southern Cross University as a casual security officer. Mr Love then pursued other lines of work including delivering fresh refrigerated chicken products for approximately two and a half years. He then leased a Mobil service station at Bangalow for a further two and a half years. In July 2003 he went into partnership with his brother and sister-in-law to lease the Pioneer Tavern in Wollongbar until late November 2004 when the partnership was dissolved because the Tavern could not support both families.
13.In December 2004, Mr Love started ECI Security which was operated by his company Drymist Holdings Pty Ltd. Mr Love states that when he started ECI Security it was a home-based business employing only four staff members however, within
12 months this had been expanded to ten casuals or part-time security staff members and two casual office staff. The security officers were employed under NSW State Security Award.
The business supplied guards for hotels clubs, shopping centres, hospitals and TAFE colleges. Over the next two years the business grew rapidly and he employed more security officers and office administration staff.14.Mrs Love, indicated during cross-examination that in the four and a half years of operating the security and investigation business, it had grown from six employees to 55 and her contribution had been to establish business systems for its operation. Mr Love indicated during cross-examination that he had established East Coast Investigations Pty Ltd in order to hold a security license because the security licensing and enforcement directorate would not permit Drymist Holdings Pty Ltd to hold a license because it was a trust company. The performance of the security activities in NSW is governed by the Security Industry Act 1998 (NSW). These laws, which came into effect in July 1998 have been designed with the clear intention of providing the community of New South Wales with confidence in a professional security industry where competition is maintained to a high standard.
Mr Love indicated that his security master license had since been surrendered.15.The other company associated with these activities was Datajaz Pty Ltd which was set up by Mr Love’s accountant to deal with superannuation issues. Mrs Love, in her examination-in-chief indicated that she was the director and secretary of a company called Platinum Leisure Pty Ltd. She stated that this company had been used by her husband to do some armed hold-up training which produced a small return of approximately $3,000.00. Otherwise, that company was dormant and not used for any other purpose.
Evidence
16.Mr Mattson, appearing for the Fair Work Ombudsman, indicated that he would rely on the following evidence:
a)Exhibit A1- Statement of Agreed Facts, filed 4 March 2010;
b)Exhibit A2- bundle of documents which is set out in letter dated 03/05/2010;
c)Exhibit A3 – sample of AWAs for employees;
d)Exhibit A4 – bundle of AWA documents faxed; and
e)Exhibit A5 (MFI -1) – extract of subpoenaed documents.
17.Mr Wilson appearing for the Respondents indicated that he would rely on the following evidence:
a)Exhibit R1 – affidavit of Damien Peter Love sworn 7 April 2010;
b)Exhibit R2 – affidavit of Tammy Leigh Love sworn 7 April 2010; and
c)Exhibit R3 – letter dated 18 May 2010 from BG Accountants and Tax Agents.
Statement of Claim
18.The Statement of Claim articulates clearly the issues that are in dispute and is most effectively presented by reproducing the entire document with the exception that the tables contained within that document have been transferred to Annexure ‘B’ to this Judgment.
The Applicant
1.The Applicant is:
(a)a statutory appointee of the Commonwealth appointed by the Governor General by written instrument, pursuant to section 687 of the Fair Work Act 2009 (Cth) (FW Act);
(b)a Fair Work Inspector pursuant to section 701 of the FW Act; and
(c)a person with standing and authority to bring these proceedings pursuant to:
(i)section 718(1) of the Workplace Relations Act 1996 (Cth) (WR Act) as it continues to apply by virtue of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) after the WR Act repeal day; and
(ii)the provisions of the Transitional Act referred to in paragraph 2 of this Statement of Claim; and
(d)able to delegate the investigation that gave rise to these proceedings to Inspector Karen Thio.
Effect of the Transitional Act
2.Under the Transitional Act:
(a)the WR Act repeal day is 1 July 2009;
(b)pursuant to sub-item 11(1) of Part 3 of Schedule 2 of the Transitional Act, the WR Act continues to apply, on and after the WR Act repeal day, in relation to conduct that occurred before the WR Act repeal day; and
(c)pursuant to sub-item 13(1) of Part 3 of Schedule 18 of the Transitional Act, for the purposes of the application of the WR Act to conduct that occurred before the WR Act repeal day, an application that could have been made by a workplace inspector may be made or continued, on and after the WR Act repeal day, by a Fair Work Inspector.
3.The application which is made by the Applicant in these proceedings is an application which, before the WR Act repeal day, could have been made or continued by a workplace inspector under the authority given to a workplace inspector by section 718(1) of the WR Act.
4.At all material times:
(a)the Applicant was a workplace inspector pursuant to s.167(1A) of the WR Act;
(b)prior to 30 June 2009, Inspector Thio was duly appointed as a workplace inspector pursuant to s.167(2)(a) of the WR Act; and
(c)on and after 1 July 2009, Inspector Thio was duly appointed as a Fair Work Inspector pursuant to s.701 of the FW Act.
The Employer
5.From about 25 November 2004 to 20 August 2009 Drymist Holdings Pty Ltd (the Employer) was:
(a)a constitutional corporation within the meaning of section 4 of the WR Act;
(b)an employer within the meaning of section 6 of the WR Act;
(c)at material times the employer of certain persons, including, inter alia:
[See Annexure B, column 1]
6.The Employer conducted business in the security industry.
7.The Employees were employed by the Employer as casual security officers.
8.On about 21 August 2009, a notification of appointment of a liquidator (Creditors’ Voluntary Winding Up) of the Employer occurred pursuant to the Corporations Act 2001 (Cth).
The Respondents
9.Damien Peter Love is a natural person and at all material times was the sole Director and Company Secretary of the Employer.
10.Tammy Leigh Love is a natural person and was at all material times, along with Damien Love, a shareholder and owner of the Employer.
11.The First Respondent and the Second Respondent had the day-to-day control of the Employer.
Applicable industrial instrument
12.From 27 March 2006 the Employer was bound by:
(a)the Security Industry (State) Award which is preserved as a notional agreement preserving State awards under Part 3 of Schedule 8 of the WR Act (herein called the Security NAPSA).
(b)the Australian Fair Pay and Conditions Standard, including a preserved Australian Pay and Classification Scale derived from the Security Industry (State) Award (herein called the Security APCS).
13.The Security NAPSA and Security APCS, inter alia, provided at the relevant times:
(a)That casual employees working ordinary time must be paid the APCS rate for each hour worked, plus a 15% casual loading;
(b)That in addition to the casual hourly rate at paragraph 13(a) above, 1/12th of that hourly rate is payable as an entitlement to pro-rata annual leave (clause 11.2.3 of the Security NAPSA);
(c)that span loadings are payable upon hours worked in addition to the ordinary time rates (clause 21 of the Security NAPSA); and
(d)that overtime is payable for work performed in addition to ordinary hours of work (clause 22 of the Security NAPSA).
14.The entitlements referred to in paragraphs 13(c)and 13(d) above are protected notional conditions under clause 52AAA of Part 3, Schedule 8 of the WR Act and are taken to be protected award conditions for the purposes of Division 5A, Part 8 of the WR Act.
Lodgement of Australian Workplace Agreements
15.Between 6 June 2007 and 30 January 2008, the Employer lodged Australian Workplace Agreements (AWAs) for some of the Employees with the Workplace Authority Director under the WR Act, as in force at that time, following the commencement of the Workplace Relations Amendment (A Stronger Safety Net) Act 2007 (Cth) (Safety Net Act).
Particulars
(a) The date of lodgement in respect of the following employees are as follows:
[see Annexure B, Column 2]Between 4 April 2008 and 9 April 2008, the Employer lodged AWAs for the remaining Employees with the Workplace Authority Director under the WR Act, as in force at that time, following the commencement of Schedule 7A (Transitional arrangements for existing AWAs) of the Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (Cth) (Forward with Fairness Act).
Particulars
(a) The date of lodgement in respect of the following employees are as follows:
[See Annexure B, Column 3]
16.Pursuant to section 347(1) of the WR Act, the AWAs commenced operating on the day they were lodged with the Workplace Authority Director.
The Fairness Test
17.Pursuant to section 346E(1) of the WR Act (as in force at the relevant time), the Workplace Authority Director was required to decide whether the AWAs passed the Fairness Test under section 346M of the WR Act.
Particulars
(a)the AWAs were lodged after 7 May 2007;
(b)as at the date of lodgement, the Employer was bound by the Security NAPSA;
(c)the Employees under the AWA were paid less than $75,000 per annum; and
(d)the AWAs excluded or modified one or more protected award conditions.
The AWAs fail to pass the Fairness Test
18.The Workplace Authority Director determined, that each of the AWAs referred to in paragraphs 15 and 0 above (collectively the Employees' AWAs) did not pass the Fairness Test under section 346M of the WR Act.
19.Pursuant to section 346P(2) of the WR Act, the Workplace Authority Director issued notices to the Employer that the Employees’ AWAs did not pass the Fairness Test (the Notices).
Particulars
[See Annexure B, Column 4]
20.The Employer did not lodge, pursuant to section 346R(2) of the WR Act, a variation of the Employees’ AWAs within the relevant period as defined by section 346R(7) of the WR Act.
21.Accordingly, the Employees' AWAs ceased to operate on account of section 346R(3) of the WR Act.
Particulars
(a) The Employees' AWAs ceased to operate as follows:
[See Annexure B, Column 5]
The shortfall obligation
22.The period beginning on the day on which the Employees’ AWAs were lodged (see paragraphs 15 and 0 above) and ending on the day the Employees’ AWAs ceased to operate (see paragraph 21 above), is the “Fairness Test period” as defined under section 346ZD(4) of the WR Act.
23.But for the Employees' AWAs, each of the Employee's employment would have been subject to the Security NAPSA and the Security APCS during the Fairness Test period.
24.Pursuant to section 346R(3) of the WR Act, the Employees were entitled to any compensation payable under section 346ZD of the WR Act.
25.In respect of each of the Employees, the amount worked out under section 346ZD(2)(a) is less than the amount worked out under section 346ZD(2)(b) of the WR Act, giving rise to an entitlement to payment of the difference (the Shortfall Amount).
Particulars
(a)In respect of each of the Employees the Shortfall Amount is as follows:
[See Annexure B, Column 6]
26.The Employer was required to pay the Shortfall Amounts to the Employees within the specified time under section 346ZD(3), being 14 days.
Particulars
[See Annexure B, Column 7]
27.The Employer did not pay the Shortfall Amounts by the due date. The Shortfall Amounts remain unpaid with respect to each of the Employees as at the date of commencing these proceedings.
28.By reason of the matters pleaded above, the Employer contravened section 346ZD(3) of the WR Act in respect of each of the Employees.
The involvement of the First Respondent
29.At all material times the First Respondent was a person who was involved in the contraventions of section 346ZD(3) of the WR Act within the meaning of section 728 of the WR Act in that he:
(a)aided, abetted, counselled or procured the contravention in question; or
(b)was directly or indirectly, knowingly concerned in or a party to the contravention in question.
Particulars
(i)the Applicant repeats paragraph 9 and 11 above;
(ii)the First Respondent was the signatory for the Employer to the AWAs;
(iii)the First Respondent organised for the Second Respondent to lodge the AWAs on behalf of the Employer with the Workplace Authority Director for approval;
(iv)the First Respondent was aware the AWAs were required to pass a Fairness Test;
(v)the First Respondent was aware that the AWAs had not passed the Fairness Test and of the obligation to pay any Shortfall Amount by virtue of:
a)the Notices referred to in paragraph 20 above;
b)correspondence from the Workplace Authority Director sent to the Employer between the period October 2008 to January 2009 in respect of each of the Employees stating that the AWA had ceased to operate and reminding the Employer of the obligation to pay any Shortfall Amount to the employees within 14 days;
c)relevant communications between the Applicant and the First Respondent; and
(vi)the First Respondent had control of the Employer’s finances;
(vii)the First Respondent did not cause the payment of the Shortfall Amount to be made by the Employer to the Employees within the required time;
(viii)Further, by virtue of his position as sole director and company secretary of the Employer, the First Respondent had knowledge of the facts and matters constituting the contraventions. Notwithstanding that knowledge, by the First Respondents acts or omissions, the First Respondent is involved in the contraventions and continuing contraventions.
The involvement of the Second Respondent
30.At all material times the Second Respondent was a person who was involved in the contraventions of section 346ZD(3) of the WR Act within the meaning of section 728 of the WR Act in that she:
(a)aided, abetted, counselled or procured the contravention in question; or
(b)was directly or indirectly, knowingly concerned in or a party to the contravention in question.
Particulars
(i)the Applicant repeats paragraph 10 to 11 above;
(ii)the Second Respondent lodged the AWAs on behalf of the Employer with the Workplace Authority Director for approval;
(iii)in dealings with the Workplace Authority Director the Second Respondent identified herself as the “owner” of the Employer and as “the employer”;
(iv)the Second Respondent was aware the AWAs were required to pass a Fairness Test;
(v)the Second Respondent was aware that the AWAs had not passed the Fairness Test and of the obligation to pay any Shortfall Amount by virtue of:
a)the Notices referred to in paragraph 20 above, which were marked to the attention of the Second Respondent;
b)correspondence from the Workplace Authority Director sent to the Employer between the period October 2008 to January 2009 in respect of each of the Employees stating that the AWA had ceased to operate and reminding the Employer of the obligation to pay any Shortfall Amount to the employees within 14 days, such correspondence being marked to the attention of the Second Respondent;
c)relevant communications between the Applicant and the Second Respondent; and
d)the Employer having previously paid a shortfall amount in December 2008 to another employee whose AWA did not pass the Fairness Test;
(vi)the Second Responded signed and lodged an undertaking to vary an AWA in response to the Fairness Test in respect of two of the Employees, Craig Nichols and Brian Watt;
(vii)the Second Respondent signed an ‘Employer Acknowledgment than an Australian Workplace Agreement stopped operating due to the termination of the employment relationship’ and in doing so, the Second Respondent acknowledged that the Shortfall Amount (applicable back-pay) would be paid to the employees within 14 days of the notice that their AWA did not pass the Fairness Test;
(viii)the Second Respondent had control of the Employer’s finances;
(ix)the Second Respondent did not cause the payment of the Shortfall Amount to be made by the Employer to the Employees within the required time; and
(x)Further, the Second Respondent had knowledge of the facts and matters constituting the contraventions. Notwithstanding that knowledge, by the Second Respondents acts or omissions, the Second Respondent is involved in the contraventions and continuing contraventions.
Statement of Agreed Facts
19.The same approach has been adopted with this material as that with the Statement of Claim. Similarly, the tables of information have been removed and placed in Annexure ‘B’ and Annexure ‘C’ as indicated.
Background
1. The Applicant has standing and authority to bring these proceedings.
2. Drymist Holdings Pty Ltd (the Employer):
(a) was a constitutional corporation within the meaning of section 4 of the Workplace Relations Act 1996 (WR Act);
(b) conducted business in the security industry;
(c) was an employer within t e meaning of section 6 of the WR Act;
(d) within the relevant period employed the following persons as casual security officers:
[See Annexure B, Column 1]
3. On and from 27 March 2006 the Employer was bound by:
(a) the WR Act;
(b) the Security Industry (State) Award which is preserved as a Notional Agreement Preserving State Awards (the NAPSA) under Part 3 of Schedule 8 of the WR Act; and
(c) The Australian Fair Pay and Conditions Standard, including a preserved Australian Pay and Classification Scale derived from the Security Industry (State) Award (the Security APCS).
4. The First Respondent was at all material times the sole Director and Company Secretary of the Employer and had day-to-day control of the Employer’s business.
5. The Second Respondent was at all material times a shareholder of the Employer, and from time to time provided assistance to the First Respondent in the running of the Employer’s business, including managing the lodgement of the Employer’s Australian Workplace Agreements (AWAs) with the Workplace Authority.
Contraventions
6. From 2006 to 2008 the Employer entered into AWAs with a number of employees including the relevant employees.
7. The Workplace Authority notified the Employer that the Fairness Test would be applied to the AWAs lodged in respect of the relevant employees.
8. The notices from the Workplace Authority provided, inter alia:
What is the Fairness Test?
The Fairness Test applies to Australian workplace agreements lodged on or after 7 May 2007 that change or remove certain protected conditions……
….
The Fairness Test will determine whether the Agreement provides fair compensation to the employee for changing or removing any of the following protected conditions:
…
What happens now?
The Workplace Authority may contact you again for extra information that is needed to conduct the Fairness Test….
….
The Workplace Authority will inform you when the Fairness Test has been completed, whether or not your agreement has passed, and what to do if it has not passed…
9. The first of these notices was dated 3 September 2007 and sent to the Employer in relation to the AWA lodged for Craig Nichols.
10. The AWAs lodged in relation to the relevant employees ultimately did not pass the Fairness Test conducted by the Workplace Authority in accordance with section 346M of the WR Act as in force from 1 July 2007 to 27 March 2008 (Safety Net Act).
First contravention
11. On 6 and 22 June 2007 the Employer lodged AWAs in respect of Craig Nichols and Brian Watt respectively.
12. The AWAs for the above employees commenced operating from their respective dates of lodgement.
13. On 8 October 2007 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the AWAs lodged in respect of Craig Nichols and Brian Watt failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWAs provided fair compensation for the removal or modification of protected conditions.
14. The notice from the Workplace Authority dated 8 October 2007 provided, inter alia:
The Fairness Test has been applied to the Australian workplace agreement between….
The Workplace Authority is not satisfied that the Agreement provides fair compensation for the removal or modification of protected conditions…
Because the Workplace Authority has determined that the Agreement has not passed the Fairness Test, the Agreement will cease to operate unless you provide the information outlined in the attached form and an appropriate undertaking. Alternatively you could provide the information and lodge a variation agreement.
Your agreement must be varied within 14 days
….otherwise it will cease to operate.
….
If the varied Agreement does not pass the Fairness Test it will cease to operate and you must pay any owed back-pay to your employee.
If we do not receive any variation or undertaking from you within 14 days of the date of this letter, the Agreement will cease to operate and you must pay any back-pay owed to the employee within 14 days of the Agreement ceasing to operate.
There are penalties of up to $33,000 for failing to pay back-pay.
…….
15. On 22 October 2007 the Second Respondent, on behalf of the Employer, lodged an undertaking to vary Mr Nichols and Mr Watt’s AWAs.
16. On 15 August 2008 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the varied AWAs lodged in respect of Craig Nichols and Brian Watt failed to pass the Fairness Test on the basis that the changes made still did not provide fair compensation for the removal or modification of protected conditions.
17. The notice from the Workplace Authority dated 15 August 2008 provided, inter alia:
Has my Agreement now passed the Fairness Test?
No. The Workplace Authority has decided that the changes you have made to the Agreement still do not provide fair compensation for the removal or modification of protected conditions….
What happens now?
The Agreement stops operating from the date of this notice….
The employee…must now receive what they would have been entitled to if the Agreement had not been made…
….
When must this payment be made?
The back-pay must be paid within 14 days of the date of this notice.
There are penalties of up to $33,000 for failing to pay back-pay.
…….
18. The AWAs for Mr Nichols and Mr Watt ceased to operate on 15 August 2008.
19. As a result of the AWAs ceasing to operate, the Employer was required to pay Mr Nichols and Mr Watt compensation pursuant to section 346ZD(3)(b) of the WR Act (as amended by the Safety Net Act) on or before 29 August 2008.
20. In breach of section 346ZD(3)(b) of the WR Act the Employer did not pay the required compensation on or before 29 August 2008, resulting in a gross underpayment of:
[See Annexure C, Contravention 1]
Second contravention
21. On 17 July 2007 the Employer lodged AWAs in respect of Dale Bremner, Justin Cowles, Wade Follington, Victor Mathieson, Gary McBeath, Lance Mortimer and Stephen Rixon, and on 10 August 2007 in respect of John Bucknall, Jeffery Catt and Stephen Watson and on 20 August 2007 in respect of Luke Knight.
22. The AWAs for the above employees commenced operating from their respective dates of lodgement.
23. On 17 October 2007 the Workplace Authority sent a notice to the Employer, similar to that set out at paragraph 8 above, that the Fairness Test would be applied to the AWAs lodged in respect of the above employees.
24. On 11 September 2008 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the AWAs lodged in respect of Dale Bremner, Justin Cowles, Wade Follington, Victor Mathieson, Gary McBeath, Lance Mortimer, Stephen Rixon, John Bucknall, Jeffery Catt, Stephen Watson and Luke Knight failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWAs provided fair compensation for the removal or modification of protected conditions.
25. The notice on 11 September 2008 was similar to the notice at paragraph 14 of the Statement of Agreed Facts.
26. No variation was lodged in relation to the AWAs for Mr Bremner, Mr Cowles, Mr Follington, Mr Mathieson, Mr McBeath, Mr Mortimer, Mr Rixon, Mr Bucknall, Mr Catt, Mr Watson and Mr Knight. Accordingly those AWAs ceased to operate on 25 September 2008.
27. On 26 September 2008, the Second Respondent signed and faxed to the Workplace Authority an “Employer Acknowledgement that an Australian Workplace Agreement stopped operating due to the termination of the employment relationship” (the Acknowledgement) in respect of 7 of the 11 employees affected by the Second contravention. The Acknowledgement stated that compensation would be paid to those employees within 14 days of the notice that their AWA did not pass the Fairness Test.
28. As a result of the AWAs ceasing to operate, the Employer was required to pay Mr Bremner, Mr Cowles, Mr Follington, Mr Mathieson, Mr McBeath, Mr Mortimer, Mr Rixon, Mr Bucknall, Mr Catt, Mr Watson and Mr Knight compensation pursuant to section 346ZD(3)(b) of the WR Act on or before 9 October 2008.
29. On 14 October 2008 a notice addressed to the Second Respondent in relation to the AWAs for Mr Bremner, Mr Follington, Mr McBeath, Mr Bucknall, Mr Catt, Mr Watson and Mr Knight was sent to the Employer providing, inter alia, that:
You were notified that the Agreement had to be varied within 14 days of 11 September 2008 to pass the Fairness Test and continue operating. According to our records, the Workplace Authority has not received an undertaking or variation to the Agreement during this period.
What happens now?
As no variation or undertaking was made, the Agreement stopped operating on 25 September 2008 (unless it was terminated or replace before that).
….
What back-pay is owed to the employee?
If the employee received less under the Agreement than they would have received if the Agreement had not been made, you will owe that employee back-pay for the difference.
…
If you owe back-pay to the employee it will be payable for the period that the Agreement applied to them.
30. On 24 October 2008 a notice addressed to the Second Respondent in relation to the AWAs for Mr Mathieson, Mr Cowles, Mr Mortimer and Mr Rixon was sent to the Employer, similar to that set out at paragraph 29 above.
31. In breach of section 346ZD(3)(b) of the WR Act the Employer did not pay the required compensation on or before 9 October 2008, or at all, resulting in an underpayment of:
[See Annexure C, Contravention 2]
Third contravention
32. On 10 September 2007 the Employer lodged AWAs in respect of Christine Hewson and Peter O’Rourke and on 17 September 2007 in respect of Shane Ottery.
33. The AWAs for the above employees commenced operating from their respective dates of lodgement.
34. On 8 January 2008 the Workplace Authority sent a notice to the Employer, similar to that set out at paragraph 8 above, that the Fairness Test would be applied to the AWA lodged in respect of Shane Ottery.
35. On 12 February 2008 the Workplace Authority sent a notice to the Employer, similar to that set out at paragraph 8 above, that the Fairness Test would be applied to the AWAs lodged in respect of Christine Hewson and Peter O’Rourke.
36. On 29 September 2008 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the AWAs lodged in respect of Christine Hewson, Peter O’Rourke and Shane Ottery failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWAs provided fair compensation for the removal or modification of protected conditions.
37. The notice on 29 September 2008 was similar to the notice at paragraph 14 of the Statement of Agreed Facts.
38. No variation was lodged in relation to the AWAs for Ms Hewson, Mr O’Rourke and Mr Ottery. Accordingly those AWAs ceased to operate on 13 October 2008.
39. As a result of the AWAs ceasing to operate, the Employer was required to pay Ms Hewson, Mr O’Rourke and Mr Ottery compensation pursuant to section 346ZD(3)(b) of the WR Act on or before 27 October 2008.
40. On 5 November 2008 a notice addressed to the Second Respondent in respect of the above mentioned employees was sent to the Employer, similar to that set out at paragraph 29 above.
41. In breach of section 346ZD(3)(b) of the WR Act the Employer did not pay the required compensation on or before 27 October 2008, or at all, resulting in an underpayment of:
[See Annexure C, Contravention 3)
Fourth contravention
42. On 11 and 30 January 2008 the Employer lodged AWAs in respect of Gordon Stewart and Warwick Jansen respectively.
43. The AWAs for the above employees commenced operating from their respective dates of lodgement.
44. On 7 February 2008 the Workplace Authority sent a notice to the Employer, similar to that set out at paragraph 8 above, that the Fairness Test would be applied to the AWAs lodged in respect of the above employees.
45. On 5 May 2008 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the AWA lodged in respect of Gordon Stewart failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWA provided fair compensation for the removal or modification of protected conditions.
46. On 7 May 2008 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the AWA lodged in respect of Warwick Jansen failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWA provided fair compensation for the removal or modification of protected conditions.
47. The notices on 5 and 7 May 2008 were similar to the notice at paragraph 14 of the Statement of Agreed Facts.
48. No variations were lodged in relation to the AWA for Mr Stewart or Mr Jansen. Accordingly those AWAs ceased to operate on 19 May 2008 and 21 May 2008 respectively.
49. As a result of the AWA ceasing to operate, the Employer was required to pay Mr Stewart and Mr Jansen compensation pursuant to section 346ZD(3)(b) of the WR Act on or before 2 and 4 June 2008 respectively.
50. On 21 November 2008 a notice addressed to the Second Respondent in respect of the above mentioned employees was sent to the Employer, similar to that set out at paragraph 29 above.
51. In breach of section 346ZD(3)(b) of the WR Act the Employer did not pay the required compensation on or before 2 June 2008, or at all, resulting in an underpayment of $2,844.44 to Gordon Stewart and on or before 4 June 2008, or at all, resulting in an underpayment of $1,797.34 to Warwick Jansen.
Fifth contravention
52. On 4 April 2008 the Employer lodged AWAs in respect of Jacqueline Axisa and Bryan Thompson and on 9 April 2008 in respect of Ian Jolley and Sarah Robertson.
53. The AWAs for the above employees commenced operating from their respective dates of lodgement.
54. On 19 June 2008 the Workplace Authority sent a notice to the Employer, similar to that set out at paragraph 8 above, that the Fairness Test would be applied to the AWAs lodged in respect of the above employees.
55. On 2 December 2008 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the AWAs lodged in respect of Jacqueline Axisa, Ian Jolley and Sarah Robertson failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWAs provided fair compensation for the removal or modification of protected conditions.
56. On 8 December 2008 the Second Respondent, on behalf of the Employer, was notified by the Workplace Authority that the AWA lodged in respect of Bryan Thompson failed to pass the Fairness Test on the basis that the Workplace Authority was not satisfied that the AWA provided fair compensation for the removal or modification of protected conditions.
57. The notice on 2 and 8 December 2008 was similar to the notice at paragraph 14 of the Statement of Agreed Facts.
58. No variations were lodged in relation to the AWAs for Ms Axisa, Mr Thompson, Mr Jolley or Ms Robertson. Accordingly those AWAs ceased to operate on 16 and 22 December 2008 respectively
59. As a result of the AWAs ceasing to operate, the Employer was required to pay Ms Axisa, Mr Jolley or Ms Robertson compensation pursuant to section 346ZD(3)(b) of the WR Act on or before 30 December 2008 and Mr Thompson on or before 5 January 2009.
60. On 9 January 2009 a notice addressed to the Second Respondent in respect of the above mentioned employees was sent to the Employer, similar to that set out at paragraph 29 above.
61. In breach of section 346ZD(3)(b) of the WR Act the Employer did not pay the required compensation on or before 30 December 2008, or at all, resulting in an underpayment of :
[See Annexure C, Contravention 5]
Investigation
62. In or around December 2008, the Workplace Authority referred to the Fair Work Ombudsman (formerly the Workplace Ombudsman) several AWAs of the Employer that had failed to pass the Fairness Test.
63. On 23 December 2008, the Applicant wrote to the Second Respondent, on behalf of the Employer, requesting time and wages records relating to several employees whose AWAs had failed to pass the Fairness Test. The Employer failed to provide the records in the time requested.
64. On 2 March 2009, the Applicant sent by facsimile a Notice to Produce Documents to the Second Respondent, on behalf of the Employer, requiring the production of time and wage records and documents regarding compensation payable to employees on or before 16 March 2009.
65. The Employer did not produce the records and documents required under the Notice to Produce Documents until 10 June 2009.
66. On 17 August 2009, the Applicant sent a letter entitled “Determination of Contravention” to the Employer advising of amounts owing to the relevant employees. A copy of this letter is annexed and marked “A”.
67. On 21 August 2009, the First Respondent placed the Employer in voluntary liquidation with the approval of the Second Respondent as a shareholder. The Applicant was advised of such on 4 September 2009.
68. These proceedings were commenced on 17 November 2009.
69. Since commencing these proceedings the First and Second Respondents have adopted a co-operative approach to resolving these proceedings.
70. As at the date of signing this Statement of Agreed Facts, no payments have been made in respect of the outstanding entitlements owed to the relevant employees.
Involvement of the Respondents
71. At all material times the First Respondent;
(a) was the sole Director and Company Secretary of the Employer;
(b) had the day-to-day control of the Employer;
(c) was the signatory to the AWAs on behalf of the Employer;
(d) organised for the Second Respondent to lodge the AWAs on behalf of the Employer with the Workplace Authority for approval;
(e) was aware that the AWAs were required to pass a Fairness Test;
(f) was aware that the AWAs had not passed the Fairness Test upon receiving notices of the same;
(g) was aware of the Employer’s obligation to make compensation payments to the relevant employees upon ultimate rejection of the AWAs;
(h) was aware prior to the commencement of these proceedings that the compensation payments owed to the relevant employees were outstanding;
(i) had control of the Employer’s finances;
(j) was the person with the authority to direct the payment of compensation entitlements to the relevant employees; and
(k) had knowledge of the facts and matters constituting the contraventions by virtue of his position as sole Director and Company Secretary of the Employer.
72. The Second Respondent;
(a) was at all material times along with the First Respondent, a shareholder of the Employer;
(b) at all material times assisted with Second Respondent with the management of the Employer;
(c) was named as the person lodging the AWAs on behalf of the Employer with the Workplace Authority for approval;
(d) in dealings with the Workplace Authority described herself as the “owner” of the Employer and as the “employer”;
(e) at all material times was aware the AWAs were required to pass a Fairness Test;
(f) at all material times was aware that the AWAs had not passed the Fairness Test upon receiving notices of the same;
(g) at all material times was aware of the Employer’s obligation to make compensation payments to the relevant employees upon ultimate rejection of the AWAs;
(h) signed and lodged an undertaking to vary an AWA in response to the Fairness Test in respect of two of the relevant employees, Nichols and Brian Watt;
(i) signed the Acknowledgment in respect of seven of the relevant employees regarding the payment of compensation at unspecified amounts;
(j) at all material times had access to of the Employer’s finances; and
(k) had knowledge of the facts and matters constituting the contraventions.
Admissions
73. The First Respondent admits that he was involved in the contraventions of the Employer set out at paragraphs 10 to 61 within the meaning of subsection 728(1) of the WR Act.
74. The Second Respondent admits that she was involved in the contraventions of the Employer set out at paragraphs 10 to 61 within the meaning of subsection 728(1) of the WR Act.
Penalty considerations
20.Both parties filed written submissions which addressed the issue of the application of facts to the law and both agreed with the following approach to the determination of penalty which are set out below.
Identification of the contravention
21.It is admitted that Damien Peter Love was involved in, pursuant to s.728 of the WR Act, a contravention of s.346ZD(3) of the WR Act in respect to each of the Employees (maximum penalty is $6,600.00). It is also admitted that Tammy Leigh Love was also involved in, pursuant to s.728 of the WR Act, a contravention of s.346ZD(3) of the WR Act in respect to the relevant Employees (maximum penalty is $6,600.00).
Course of conduct
22.Breaches of a particular applicable provision in relation to a number of different employees may, depending on the particular circumstances, attract the operation of s.719(2): Clothing and Allied Trades Union v Snugglerite Industries Pty Ltd (1990) 34 IR 124 at 126. Particularly relevant is whether the breaches arose out of separate acts or decisions of the employer, or out of a single act or decision. The latter case will constitute a course of conduct but the former will not: Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 per Gray J at 266 – 267 with whom Northrop J agreed at 245. In this case, Drymist Holdings breached s.346ZD of the WR Act by failing to pay the required compensation to each of the Employees on or before the respective due date on five separate occasions. The Fair Work Ombudsman submits that on each occasion, a separate decision was made by Drymist Holdings to not pay the compensation. Therefore, unless s.719(2) applies, the Fair Work Ombudsman submits that there are five contraventions of the relevant applicable provision. Mr and Mrs Love have accepted that there were five contraventions. It is incumbent on Mr and Mrs Love to establish a single course of conduct: Cotis v Pow JuiceIndustries Pty Ltd [2007] FMCA 140 at [37]. Mr Love at para.73 and Mrs Love at para.74 of the Statement of Agreed Facts admit that they were involved in the contravention of Drymist Holdings within the meaning of s.728 of the WR Act. Therefore, the maximum penalty that could be imposed on both Mr and Mrs Love in this matter is $33,000.00.
Determination of penalties
23.The factors relevant to the imposition of a penalty under the WR Act have been summarised by His Honour Mobray FM in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurants and Bars [2007] FMCA 7 at [26] – [59] as follows:
a)The nature and extent of the conduct which led to the breaches;
b)The circumstances in which that conduct took place;
c)The nature and extent of any loss or damage sustained as a result of the breaches;
d)Whether there has been similar previous conduct by the defendant;
e)Whether the breaches were properly distinct or arose out of one course of conduct;
f)The size of the business enterprise involved;
g)Whether or not the breaches were deliberate;
h)Whether senior management were involved in the breaches;
i)Whether the parties who committed the breach had exhibited contrition;
j)Whether the party committing the breach had taken corrective action;
k)Whether the parties committed the breach had cooperated with the enforcement authorities;
l)The need to ensure compliance with minimum standards by provision of an effective means of investigation and enforcement of employee entitlements; and
m)The need for specific and general deterrence.
24.This summary was adopted by his Honour Tracy J in Kelly v Fitzpatrick (2007)166 IR14; [2007] FCA 1080 at [14]. While the summary is a convenient checklist, it does not proscribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion: Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11]; see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [91] per Buchanan J. The Fair Work Ombudsman also accepts that penalties are not a matter subject to precedent. The choice of penalty must be dictated by the individual circumstances of the present case: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) [12]. However, there is a similar case of Workplace Ombudsman v Securit-E Holdings Pty Ltd & Anor [2009] FMCA 700.
25.In addition to the issues set out above, Mr Wilson, appearing on behalf of the Respondents, submits that the following passage from Torpia v Empire Printing (Australia) Pty Ltd [2009] FMCA 853 per her Honour Barnes FM:
[85]The court has a broad discretion in relation to penalty. It is not to regard itself as fettered by any checklist of mandatory criteria (see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 and see generally Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383). It is necessary to consider whether I am satisfied in all the circumstances that it is appropriate to impose a penalty (see Alfred v Walter Construction Group Ltd [2005] FCA 497 at [7]).
[86]Nonetheless, as submitted by the applicant, a useful starting point in relation to penalties under the Act is the judgment of Branson J in Construction, Forestry, Mining and Energy Union v Coal & Allied Operations Pty Ltd (No 2) at 232 in which her Honour pointed out that the Act gave no explicit guidance as to the circumstances in which a penalty would be appropriate or as to the circumstances in which a penalty of or near the maximum or of a lesser amount may be called for, except that the court should consider what is appropriate in all the circumstances of the case.
[87] Her Honour provided a list of considerations that the court may appropriately have regard to in determining whether particular conduct called for the imposition of a penalty and the amount of the penalty.
26.Mr Wilson submits that a list of considerations that was set out which are largely the same as those set out in the Applicant’s submissions, except her Honour Barnes FM cited an additional factor being the size and financial resources of the contravener. That additional factor will be discussed further in my reasons.
Submissions
27.Both parties have prepared submissions addressing the relevant factors in the imposition of penalty under the WR Act which was summarised by his Honour Mobray FM in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurants and Bars (“Pangaea”)(supra).
The circumstances in which the conduct took place and the nature and extent of the conduct (Pangaea (a)& (b)).
28.It is submitted on behalf of the Fair Work Ombudsman that the conduct in this case involved the failure by Drymist Holdings through the decision of Mr and Mrs Love to afford the Employees the minimum rates of pay and conditions which they were entitled to under the relevant industrial instruments as a result of the AWAs failing to pass the Fairness Test. The result of the contravention was that the Employees suffered financial detriment by not having their minimum rates of pay and conditions afforded to them within the time prescribed by the legislature. The minimum employment standards and their enforcement, are important matters under the legislation, and non-compliance is not to be treated in a light-handed way: Pangaea (supra) at [19] – [22].
29.The breach took place in circumstances where Drymist Holdings had clearly been advised by the Workplace Authority of its obligation to make back-payments but failed to do so. Mr Love was the sole director and company secretary of Drymist Holdings, being responsible for its financial management and also had the day-to-day control. Mrs Love together with Mr Love was a shareholder of Drymist Holdings and assisted Mr Love with its management and was named as the person lodging the AWAs on behalf of Drymist Holdings. Both Mr and Mrs Love were aware of Drymist Holdings’ obligation to make back-payments to the Employees and in some cases, back-payments had been made to other employees of Drymist Holdings. Mr and Mrs Love’s affidavit identifies that in 2009 they were both aware that Drymist Holdings would not be in a position to make back-payments to the relevant Employees.
30.The submissions on behalf of the Respondents are that they do not agree that they made a conscious decision not to afford the Employees the minimum rates of pay and conditions. Mr and Mrs Love believed that Drymist Holdings was good to its Employees and tried to find a mutually acceptable and lawful payment scheme and that some of Drymist Holdings’ Employees were overpaid. Mr and Mrs Love engaged a workplace lawyer to assist Drymist Holdings to meet this goal.
31.Mr Love, in his affidavit at paras.21-25 sets out the steps that he took to engage Enterprise Law to advise him on the preparation of AWAs:
21. [In] late April 2006 I spoke with Meg McNaughton over the phone. I told her about our business and gave her a rough outline on the security industry in our local area. I told her about the long shift times we were contracted to provide at places like constructions sites. She spoke to me briefly about the advantages, cost savings and benefits of going to AWAs for both my company and the staff. She said to me to put a list of the different types of guards, hours that they roughly work, and what work that they complete. I then prepared this information and gave it to Tammy to fax off.
22. The benefits to the staff were as follows:
a. They were able to work longer shift times and have extra days off (similar to the NSW Police Service). For example I had a guard working on the construction of the Ballina Ramada Unit Complex. The guard would work from 7pm to 6am. The guards would work 4 nights and then have 3 days off. The guard would be stationed inside the fenced construction site and would do an hourly walk around the complex. In between these walk arounds the guard would sit inside the site office reading or watching TV. These jobs appealed to most of the guards. Under the Award I would have to split this role between two employees. One would work 8 hours from 7am to 3am and then another would work 3am to 6am. This type of structure was required to make it affordable under the Award but did not suit the employees.
b. Getting paid more for working Monday to Friday then normal award rates.
c. If a staff member wanted to work more than 40 hours per week when extra work came in he/she could.
23. The benefits to the company were being able to invoice one flat rate for seven days a week. This did reduce invoicing time. There were also benefits for the client. Example: Lismore Base Hospital (Mental Health Unit) making it easy for them to call in guards 24/7 as required and make budgets easy to prepare for.
24. In late April we engaged Meg McNaughton to help the business draw up AWAs and give us advice about the process. The total cost of her advice and drawing up of the AWAs was around $2,000.oo as best as I can recall.
25. In May 2006 I received an AWA template from Meg McNaughton for me to review.
32.
The Fair Work Ombudsman contends that the fact that legal advice was obtained is of little consequence as it is not a discounting factor and if the advice is wrong, it is a matter between that company and the advisor: Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193 at 308 – 310; Visy Paper Pty Ltd v ACCC [2005] FCAFC 236. The material contained in
Mr Love’s affidavit related to the time before the introduction of the Fairness Test. At that earlier stage, the business could not issue AWAs which removed various award allowances and entitlements. The advice, if it exists, was given at a time when the law was different. Reliance on outdated legal advice cannot be a mitigating factor.
33.The Fair Work Ombudsman contends that the employer ought to be aware of changes to the law, especially when it comes to important matters of employment conditions as they have never been static: Cotis v Pow Juice Pty Ltd (supra) at [63]. Further, the pertinent legal advice given to Mr and Mrs Love is not contained in the evidence. The advice relied upon at Annexure ‘A’ to the affidavit of Mr Love was advice obtained following notification of the Fairness Test by the Department. The brevity of which the matter is expressed in the affidavit evidence does not place the Court in a position where it could weigh that fact in any meaningful way so the Court has no sense of materiality of the advice, the scope of the advice or the extent to which Mr and Mrs Love relied upon it. In order to be helpful and properly serve the interests of Mr and Mrs Love, it ought to have been disclosed: McIlwain v Ramsey Food Packaging Pty Ltd (No 4)[2006] FCA 1302 at [90] and [99]
34.Until the law changed in May 2007, Drymist Holdings had successfully submitted AWAs which were subsequently approved. Once they became aware of the change in the law after the Workplace Authority sent the letter dated 3 September 2007, they sought advice from their lawyer for further assistance. During the period the Employee AWAs were being considered (March 2008) the Workplace Authority sent letters approving other AWAs that were submitted by Drymist Holdings. It is submitted that Mr and Mrs Love made a conscious effort to comply with the law by engaging a lawyer to assist them in the understanding of the process.
35.It is argued that if Mr and Mrs Love had been notified in a more timely manner of the failure of the Employee’s AWAs they could have afforded to rectify the situation and the business may have avoided insolvency. The circumstances included that Drymist Holdings commenced paying the Employees under the AWAs upon lodgement but could not afford to pay the back-payments once the AWAs were rejected, on average 11.6 moths after lodgement. Had Mr and Mrs Love, particularly Mr Love, foreseen the rejection of the AWAs, he would not have paid the Employees the AWA rates and he would have based Drymist Holdings tenders for security contracts on higher rates of pay.
36.Mr Love, in his affidavit at para.40 states:
In September 2007 I received a letter from Workplace Authority stating “the Fairness Test will be applied to your Australian Workplace Agreements.” I was not informed and did not have any knowledge about this information prior to this letter being received.
37.The Fair Work Ombudsman advances the argument that ignorance of an employers obligation to an employee is no excuse for a failure to pay an employee its lawful entitlements: Sharpe v Dogma Enterprises Pty Ltd (supra) at [16]; Brobbel v S & C Mack Pty Ltd [2008] FMCA 1355 at [15]; Klousia v KTM Investments Pty Ltd & Anor [2009] FMCA 208 at [38]; Dennington v Pee Cee Pty Ltd [2008] FMCA 79 at [51].
38.It is acknowledged that the Loves, particularly Mr Love, chose to put Drymist Holdings in liquidation and not to pay the shortfall amounts out of their own personal finances. They had, less than a year before Drymist Holdings went into liquidation, advanced in excess of $71,000.00 to Drymist Holdings to help it meet its obligation but they could not afford to invest more given the dire financial position of their business and their obligations to their young family. It is further acknowledged that the failure to make payments to employees is of a serious nature. Mr and Mrs Love submit in mitigation that the payments would not have been incurred or would have been incurred to a much lesser extent, such that they would have been able to be paid, had the Workplace Authority informed them sooner of the AWAs failure, or if the AWAs were not operable from the date of lodgement, rather only after they are approved.
39.It is also acknowledged that Mr Love as the sole director and company secretary of Drymist Holdings, was responsible for the financial management and day-to-day control. It is argued therefore that Mrs Love is much less culpable than Mr Love who was essentially the controlling mind of Drymist Holdings. Mrs Love was, at the time of the contravention, the primary carer of their young children and assisted with the business at the direction of Mr Love.
40.Mr and Mrs Love agree that the Workplace Authority clearly advised Drymist Holdings that it had an obligation to make back-payments but the exact amount of the back-payments was not determined or communicated to Drymist Holdings for some time. Mr and Mrs Love had trouble communicating effectively with the Workplace Authority initially but after they had been given representatives to contact directly, they have worked cooperatively with the Authority.
Nature and extent of the loss or damage (Pangaea(c))
41.It is submitted on behalf of the Fair Work Ombudsman that the detriment caused to each of the Employees is significant and equates to a total of $74,391.01. The amounts owed to the Employees range from $71.67 to $10,355.80 (see Annexure B, column 6). The amounts are not insignificant bearing in mind that the Employees are not highly paid: Securit-E Holdings Pty Ltd & Ors [2009] FMCA 700 at [11]. These amounts have not been rectified and are unlikely to be paid as Drymist Holdings was placed in voluntary liquidation by Mr Love on 21 August 2009. The nature and extent of the loss is serious.
42.The submission on behalf of the Loves is that the total unpaid amount is significant as are most of the amounts due to the Employees. Six of the 22 Employees are owed less than $1,000.00, and it is submitted that these amounts are less significant than those owed over $1,000.00. Mr Love, in his affidavit at para.83 states:
In all my years of running businesses, I have never contravened a workplace or other law. For the most part, my employees in ECI like working for me and were happy with the arrangements under the AWAs. Not one of my ex-employees has told me they have been adversely affected by being employed under the AWAs or feeling ripped off. Some have said they are disappointed that the company no longer operates as they did like working for me.
43.The Fair Work Ombudsman submits that the failure to reach a back-payment agreement exhibits a failure to acknowledge the seriousness of the conduct which it is agreed between the parties to have occurred: Klousia v KTM Investments Pty Ltd & Anor (supra) at [63]. It is submitted that this assertion demonstrates a lack of serious contrition and the Ombudsman asserts the need for specific and general deterrence to play a significant role in determining penalty.
44.Mr Love, in his affidavit at para.85 states:
I did try to pay back the employees who the authorities said I had underpaid, but when I saw the total I had to pay, I knew I could not afford it. I am deeply sorry about all this and if any employee was badly done by because of my actions I would have been sure to rectify their position as soon as possible. But no one has come to me saying they need the back-payment.
45.The Fair Work Ombudsman submits that it should not be only a matter for employees to seek their legal minimum entitlement. An employer should provide their entitlement as obliged by legislation. This objective factor should have little, if any, relevance in mitigation and it demonstrates the lack of sincere contrition and the need for specific and general deterrence to play a significant role in determining penalty.
Similar previous conduct
46.
There is no allegation of any previous Court determination of prior contraventions of the WR Act by Mr or Mrs Love.
The submission advanced on behalf of Mr Love is that this is particularly significant as he has been managing small businesses for about 13 years.
Whether the breach arose out of one course of conduct (Pangaea (e))
47.
The parties agree that there have been five contraventions.
This will be discussed further in consideration in relation to penalty.
Size and financial circumstances of the business (Pangaea (f))
48.
The Fair Work Ombudsman submits that the size and financial circumstances of Drymist Holdings are not relevant in this case as Drymist Holdings was placed into liquidation on 21 August 2009 prior to the commencement of these proceedings. Nevertheless, any sanctions should be imposed at a meaningful level: Kelly v Fitzpatrick (supra) at [28]. Insolvency, personal or corporate is not a refuge from sanction: Cotis v Pow Juice (supra) at [12].
It is submitted that notwithstanding the size and financial circumstances of the business, Mr and Mrs Love were the controlling minds of Drymist Holdings and the decision makers in relation to the contraventions.
49.It is submitted on behalf of the Loves that Drymist Holdings was a profitable small business which, during 2007, hired dozens of security personnel on a casual basis plus several office staff. Once it became apparent that the AWAs were being rejected by the Workplace Authority in mid-2008, Mr Love returned all staff to NAPSA award which increased Drymist Holdings’ charge out rate and meant that the prices he had been quoting for work to be done by Drymist Holdings was too low. Drymist Holdings began making huge losses on the contracts that had already been entered on the basis of the AWAs terms and conditions.
50.It is argued that it is relevant that the reasons for Drymist Holdings’ failure was the amount of back-payments required to be made to the Employees. Had these back-payments not have been due and payable, Drymist Holdings could have adjusted its business including increasing the quotes for security contracts and may well still be in business employing local staff. Instead, it was placed in voluntary liquidation as it could not meet its obligations. It is acknowledged that insolvency is not a refuge from sanction but the insolvency and the related financial situation of Mr and Mrs Love is a factor that the Court is entitled to take into account when deciding the appropriate penalty to impose on the individuals.
51.
In response to the Fair Work Ombudsman’s submissions it is agreed that Mr Love was the controlling mind and decision maker of Drymist Holdings in relation to the contraventions and
Mrs Love was not. She admits that she was involved in the contraventions, but not that she was the controlling mind and the decision maker of Drymist Holdings in relation to the contraventions. In this regard, she assisted Mr Love according to his directions.
52.Mr and Mrs Love submit that the financial circumstances of Drymist Holdings and their capacity to pay are relevant factors in determining the penalty. The submission that Mr and Mrs Love knew some amount of back-payments may be payable if the AWAs were rejected, does not change their primary submission that they would have conducted their business very differently to avoid having the amount of repayments payable had they known the AWAs would fail some 12 months after lodgement.
53.The Court is invited to accept the evidence of the financial position of Drymist Holdings as assistance to the Court, particularly if the Court draws the available inference that Drymist Holdings was placed into voluntary liquidation as it was no longer a profitable business. Had it have been making money it would not have ceased operating on 1 June 2009, nor would it have been put into liquidation in August 2009.
54.In his affidavit, Mr Love raises a number of issues in respect of his financial circumstances at the time of the contravention:
(a) [Paragraph 50]In May 2008 I received approximately five letters advising that AWAs had not passed the Fairness Test. These were original AWAs and not varied AWAs. At this time I was concerned about the consequences of the back-pay obligation particularly if the other pending AWAs were also rejected.
(b) [Paragraph 51] In mid-2008 I returned all staff to Security Industries NAPSA award due to the increasing compliance and administration time cost. During this month it became apparent that our prices were too low compared to the wage cost so I started to increase the company’s charge-out rate to customers from then on.
(c) [Paragraph 53] I was working more in static guard roles and less in the office by this time, particularly on the contracts where the company was making a huge loss from employing staff.
(d) [Paragraph 57] However the problems arising out of the rejection of the AWAs and the subsequent change in our employment practice and payment systems had a disastrous effect on the business and its profitability.
55.The affidavit of Mrs Love contains the following information concerning the financial circumstances at the time of the contraventions:
(a) [Paragraph 26] In November 2008 Damien and I had a discussion which included Damien saying “the business is really struggling with increased wage costs and administration costs. I am struggling to make money from the contracts as I quoted on AWA wage costs but have had to change them and now we are losing a lot of money. I think if we put some money into the business to help the cash flow we can make it through this tough patch. Hopefully the business will be ok but it may not. There may be even bigger problems ahead.” I agreed to do this. So in November/December $71,200.00 of our private money was invested into the business to help it continue.
(b) [Paragraph 30]Damien discussed with me Nicole and Elke words to the effect “due to the increased financial hardship of the company and our personal finances being totally absorbed last year, we simply cannot afford that amount of back-pay or any further requests for back-pay. I will have to sort this out with the Department.
56.The Fair Work Ombudsman advances the argument that Mr and Mrs Love were aware of the obligation to make back-payments since at least 4 October 2007 (see Meg McNaughton’s advice, annexure A to Mr Love’s affidavit). Yet the only evidence of financial circumstances of a company is an unverified profit and loss statement for the financial year 2008/2009 and submits that unverified statements are of little assistance: Cotis v Pow Juice Industries Pty Ltd (supra) at [70].
57.In respect of Mr Love’s capacity to pay any monetary penalty to be imposed should take into account his financial position he advances the following issues in his affidavit:
(a) [Paragraph 1] I currently rent a house with my family at 19 Central Park Drive, Wollongbar, I rented this house since May 2009.
(b) [Paragraph 4] Since my company went into liquidation… I have not done any paid work. I have been volunteering casually as a deck hand on fishing boats in Ballina. Last year I did Certificate III in Transport and Marine studies called Master Class 5 at TAFE. This is to certify me to control commercial boats so I can work in this industry in the future. The volunteering I do enables me to get my hours up to finish my certification.
(c) [Paragraph 75] In June 2009 my wife sold her house and since then we have been unable to purchase another house due to the amount of our money that has been put into the business.
(d) [Paragraph 82] I have been unable to hold a full-time job during this period due to my anxiety and stress from the situation, the media, the financial stress that this has created in our personal life such as losing our family home and trying to keep life normal for our children who attend a very small community school where everyone has heard what has happened with my company and the breaches. The local paper has published stories about the company breaching the law and going into liquidation.
58.Similarly, Mrs Love, in her affidavit, raises the following issue in respect of her capacity to pay any penalty:
(a) [Paragraph 1] I am currently renting a house with my family at 19 Central Park Drive Wollongbar. I have rented this house since May 2009.
(b) [Paragraph 3] I am 34 years of age and am currently working on a permanent part-time basis at ACE North Coast Community Colleges in Lismore as the Business Training Unit Coordinator.
(c) [Paragraph 26] As above see[59(a)]
(d) [Paragraph 27] Around this time I then decided to place my house on the market in my anticipation of Damien’s expectation of bigger problems in the business.
(e) [Paragraph 33] My house was sold in June 2009 and since then we have been unable to purchase another house due to the amount of personal capital that had been put into the business.
(f) [Paragraph 38] I have been employed at ACE North Coast Community College on a permanent basis since October 2009 and I am unable to work full-time due to the stress of the court case and the return of my rheumatoid arthritis.
(g) [Paragraph 39] This case and the close of the business has had a big impact on me and my family. Damien has been very stressed, as have I, and it has affected the kids and our financial situation dramatically.
59.The Fair Work Ombudsman submits that the difficulties in paying penalties should not prevent the Court from imposing penalties which are otherwise appropriate and relies on the following authorities:
Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 at 508 where it was said:
In this connexion it is important that the respondent - and other employers bound by the award or by other awards under the Act - understand the importance of complying with an award and it follows that any decision taken by them which is regarded as affecting their obligations to comply with particular provisions of an award or the award generally should only be taken after careful consideration. They must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed.
Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd (1994) 127 ALR 673 at 688 where it was stated:
While this evidence suggests that both Vista and Mr McNamee may have difficulty in paying penalties, I do not think I should allow it to deflect me from imposing whatever penalties are otherwise appropriate.
Australian and Consumer Affairs Commission v ABB Transmission and Distribution Ltd [2001] FCA 383 at [13] in a discussion in respect to deterrence it was stated:
For a penalty to have the desired effect, it must be imposed at a meaningful level.
60.These principles have been subsequently followed in prosecutions under workplace legislation in Cotis v Pow Juice Pty Ltd (supra) at [68]; Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors [2010] FMCA 252 at [74]; Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] – [29]. There needs to be cogent evidence about the actual financial circumstances of a respondent in order for the Court to consider the factor in mitigation of a penalty: McIlwain v Ramsey Food Packaging Pty Ltd (No.4) [2006] FCA 1302 at [98]; Rajagopalan v BM Sydney Building Materials Pty Ltd (supra) at [29] where his Honour Driver FM recognised the need to adduce proper evidence of incapacity to pay for it to be a relevant consideration. The suggestion is advanced that such evidence is not before the Court and the issue of capacity to pay ought to have little, if any, relevance to the issue of mitigation.
61.Mr and Mrs Love acknowledge that the Court may take into account the offenders capacity to pay the monetary penalty. Difficulty in paying penalty should not prevent the Court from imposing penalties, but it is certainly relevant to the level of penalty the Court will impose on a person who has limited ability to pay that penalty. The evidence is that these contraventions have had a very adverse consequence, both personally and financially, on the Love family. Mr Love has not had full-time work since his business went into liquidation and Mrs Love has only been able to work on part-time basis due to the stress of these proceedings as well as her history of rheumatoid arthritis. All investments they put into Drymist Holdings are now worthless. The Court was referred to the Federal Court decision in Lynch v Buckley Sawmills Pty Ltd (supra). At the end of the quote, the Court states that the penalty must be imposed at a meaningful level. A meaningful level will be different depending on the contraveners financial circumstances. Impecunious offenders such as Mr and Mrs Love will certainly feel the imposition of a monetary penalty much more than persons of means.
62.
As her Honour Barnes FM suggested in Torpia v Empire Printing (supra) it is relevant if a penalty will have a deleterious affect on the contraveners or if it would be futile to impose a penalty of any significance. In Jones v RWH Parcel Delivery Pty Ltd [2008] FMCA 1153 her Honour Cassidy FM took the directors very poor financial position and the company’s debts and future inability to trade into account in determining penalty. The directors were penalised $5,000.00 (and the company $25,000) for failing to pay award and casual loadings in relation to 18 workers over a 12 month period. The underpayments amounted to $27,586.30.
Her Honour also took into account the small size of the business.
Deliberateness of the breaches
63.
The Fair Work Ombudsman contends that the admissions by
Mr Love that he was responsible for the financial management of Drymist Holdings was aware of Drymist Holdings’ obligations to make compensation payments to the relevant Employees and had authority to direct that those payments be made must lead to the conclusion that the breaches were deliberate. Similarly, the admission by Mrs Love that she was aware of Drymist Holdings’ obligations to make compensation payments to the relevant employees also demonstrates a deliberateness of the breaches. Mr Love also asserts in his affidavit at para.73 that the ‘communication and assistance’ provided by the Workplace Authority was very poor and that the Loves had great difficulty in finding out what they were supposed to be doing.
64.The Fair Work Ombudsman does not accept those assertions as bearing any relevance on the contraventions. The Loves received clear advice from the Workplace Authorities in the form of Notices advising at various stages what Drymist Holdings was required to do. Further, Mr and Mrs Love had, at an early stage, legal advice that the AWAs needed to be varied to pass the Fairness Test. Even the advice recognises the need for back-pay. The non-payment of compensation as a result of the failure of the AWAs to pass the Fairness Test was deliberate and was a serious breach.
65.
It is acknowledged on behalf of the Loves that the decision not to make the compensation payments was deliberate.
The accumulation of the compensation amounts payable was not deliberate and could have been avoided if the Workplace Authority acted in a timely manner. The Loves did try to comply with their legal obligations by engaging a lawyer and by making repayments to other employees. It was only after the point that Drymist Holdings could no longer afford to make the repayment amounts did the repayments cease.
Involvement of senior management (Pangaea (h))
66.It is agreed that both Mr and Mrs Love have admitted that they were involved in the contraventions of Drymist Holdings. It is not alleged that any other person has been involved in the contraventions.
Contrition, corrective action and cooperation with authorities (Pangaea (i) (j) and (k))
67.The Applicant contends that any contrition or remorse must be genuine and sincere: Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors [2010] FMCA 525 at [64]. The argument advanced by the Applicant is that Mr and Mrs Love have not accepted responsibility for their conduct nor have they expressed any sincere contrition for the contraventions. Mr Love has expressed some regret in his affidavit at paras.84-85 regarding the course of events yet in the same paragraph also indicates that he has made no effort to rectify the underpayments because the Employees have not asked him to. Despite there being cooperation in respect to the investigation of the matter, the Applicant submits that no corrective action has been taken as all compensation payments owed to the Employees remain outstanding and that due to Drymist Holdings being placed into voluntary liquidation, it is unlikely that such entitlements will be recovered.
68.
Mr Wilson, on behalf of Mr and Mrs Love, submits that they have accepted responsibility for their conduct by admitting their involvement in the contraventions. It is submitted that their early acceptance of their involvement should have afforded them a discount in the vicinity of 25% as in Armstrong v Bigeni Contracting Pty Ltd [2008] FMCA 485 at [48] and [58].
Both have expressed sincere contrition for the contraventions.
Mr Love, in his affidavit at para.84 states that he “deeply regrets that it happened” and at para.85 that he is “deeply sorry about all this and if any employee was badly done by because of my actions I would have been sure to rectify their position as soon as possible”. It is acknowledged that despite being cooperative in respect to the investigation of this matter, the compensation payments to the Employees have not been made by Mr and Mrs Love and given that Drymist Holdings is in liquidation, it is not known if the Employees will receive their entitlements. Mr and Mrs Love have suggested that the making of any penalty imposed on them should be made payable to the Employees.
Ensuring compliance with minimum standards (Pangaea (l))
69.The Applicant submits that this is an important consideration in the present case. One of the principle objects of the WR Act (at all times) has been the maintenance of an effective safety net and an effective enforcement mechanism. The substantial penalties set by the legislature for breaches of such minimum entitlements reinforces the importance based on compliance with minimum standards.
70.Mr and Mrs Love acknowledged that it is crucial to ensure minimum entitlements are upheld. They have always tried to be good employers and until now have succeeded in that goal (Affidavit of Damien Love para.83). Once it became apparent to Mr Love in mid-2008 that there was a problem with the AWAs submitted after May 2007, he put all staff back on award wages, despite not being notified of the failure of 20 of the 22 AWAs until after August and up to December 2008.
General deterrence (Pangaea (m))
71.The Applicant contends that it is well established that the “need for specific and general deterrence” is a factor that is relevant to the imposition of penalty under the WR Act: Pangaea (supra) at [26] – [59]. The role of general deterrence in determining the appropriate penalty is illustrated by the comments in Ponzoi v B&P Caelli Constructions Pty Ltd (2007) 158 FCR 543 per Lander J at [93] where his Honour states:
93. In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217. In some cases, although hardly in this type of contravention, rehabilitation is an important factor.
72.Similarly, in CPSU v Telstra Corporation Ltd (2001) 108 IR 228 per Finklestein J at 231:
…even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct.
73.The contravention in the current case concerns the minimum entitlements of casual employees in the security industry where the employer has removed certain minimum protections under the AWA.
74.It is submitted on behalf of Mr and Mrs Love that they agree with the Applicant’s submissions as to general deterrence. However, the law has been repealed and consequently amended since these contraventions which should ameliorate the need for general deterrence. They further disagree that Drymist Holdings removed certain minimum protections as this misconstrues the circumstances. Drymist Holdings had been, up to March 2008, successfully submitting AWAs containing similar terms to those submitted for the Employees. Drymist Holdings did not remove minimum standards, as the law changed which meant that some of the AWAs lodged after May 2007 did not meet the new Fairness Test.
Specific deterrence (Pangaea (m))
75.The Applicant submits that the need for specific deterrence is high because of the following factors:
a)Mr Love’s affidavit at para.8-15 indicate that he has owned and operated several businesses throughout his career (and is likely to do so in the future);
b)Mr Love is currently a director and secretary of three companies [see Annexure “D”];
c)Mrs Love is also currently a director and secretary of a company [see Annexure “D”];];
d)Despite being aware of Drymist Holdings’ obligation to make compensation payments to the relevant Employees, no attempt has been made to make such payments; and
e)Mr Love placed Drymist Holdings into voluntary liquidation shortly after receiving a ‘Determination of Contravention’ letter from the Applicant on 17 August 2009.
76.On behalf of the Respondents it is submitted that there is no evidence before the Court that Mr Love is likely to own or operate a business in the future [transcript]. Mr Love’s affidavit at para.82 indicates that he has not been able to hold a full-time job since the liquidation of Drymist Holdings. Furthermore, the significant and detrimental consequences flowing from these contraventions act as specific deterrence for them both (Damien Love’s affidavit para.81, 82, 84 and 85; Tammy Love’s affidavit paras.37-38). The companies identified at para[xx](b) and (c)] are no longer operating [transcript].
Additional consideration
77.Both Respondents in their affidavits have raised the issue of their personal health. Mr Love, in his affidavit at para.81 states:
In August 2009 I went and saw my local doctor, Dr Leslie at Alstonville clinic as I was putting on weight and becoming very angry and had symptoms of anxiety and avoidance behaviours. The local doctor referred me to a psychologist, Dr Lloyd of Byron Bay. I then started having weekly visits.
78.Mrs Love, in her affidavit at para.37 states:
In September 2009 I visited Dr Leslie at Alstonville clinic as I was extremely anxious and unable to sleep at night. Dr Leslie referred me to a psychologist, Dr Brendan Lloyd in Byron Bay. I have started having weekly visits and apart from a few months back, I continued to visit the psychologist now.
79.The Fair Work Ombudsman submits that the present health of the Respondents is not, and cannot be, relevant to the assessment of penalty on an earlier contravention. Health, at the time of the contravention could, potentially, be relevant in some circumstances but they do not arise in this matter. In Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors [2010] FMCA 252 at [75] agreed that the state of health of a respondent has little or no relevance. In this matter the health of the Respondents is not established by cogent and documented evidence.
Consideration
80.The particular objective of the WR Act which is relevant to these proceedings is to ensure compliance with minimum standards. This has been a continuing goal and objective of Workplace Relations Legislation in this country for a considerable time and is similar to the objectives of the Fair Work Act 2009. This matter concerns the non-provision of minimum entitlements to employees which is fair compensation for the removal or alteration of award conditions. As liability has been admitted, the issue before the Court is the imposition of penalty which must be at a meaningful level that demonstrates the importance of compliance with employee entitlements. In examining the contravention, I will consider the objective seriousness of the conduct which led to the contraventions, the issue of deterrence and any mitigating factors. Initially dealing with the objective seriousness of the offense includes the nature and extent of the conduct, the circumstances in which it occurred, whether it was deliberate or not and the extent of loss or damage.
81.This matter only deals with monetary entitlements encompassing hours worked, minimum wage, whether or not a loading is applied to that rate or not. The Fair Work Ombudsman contends that non-compliance could have been addressed and the liability determined by comparing what was actually paid to what would have been paid under the applicable award. That task was not undertaken until January 2009 when Mr and Mrs Love asked the office manager, Ms Elke Robillard to perform that comparison, whereas it was a task that should have been done in October 2007 when the issue arose for the first time. I believe that this claim may be a gross oversimplification of the situation as at this stage it could have only been achieved by maintaining duplicate sets of pay-records for all employees as the method of determining which AWAs satisfied the Fairness Test was not made available to the public and was subject to the discretion of the Workplace Authority.
82.It has been submitted that although this assessment had not occurred, Mr and Mrs Love were receiving the fruits of the business:
a)Sale of part of the business of ECI Security to Sydney Night Patrol & Inquiry Co (SNP) on 31 October 2007; - for an initial payment of $440,000.00 plus GST.
b)In November 2008, finalisation of the sale to SNP, payment of the remaining $88,000.00;
c)Rental payments received in respect of the 31 Owens Crescent property; from 31 January 2008, initially at $345.00 per week.
d)Wages received by both Mr and Mrs Love including the period after the business has ceased to operate in June 2009, being an amount of $17,800;
e)Transfer of assets of the company, including a motor vehicle and trail bike.
However, during this period there were no repayments made to Employees.
83.The case advanced against Mr and Mrs Love by the Fair Work Ombudsman is claimed to be demonstrated by consideration of the timeline of events because it shows the deliberate nature of the contraventions. Mr Mattson provided the Court with a document setting out this timeline, however I do not intend to reproduce or address every issue in that document, but rather to consider the key points. Contrary to the submission that the timeline shows a pattern of deliberate behaviour to deprive the nominated Employees of their rightful entitlements, I believe that the timeline establishes a different set of circumstances that occurred over three distinct periods being pre 30 June 2008, post 30 June 2008 and post 1 June 2009, being the date that Drymist ceased trading.
84.The making of AWAs under the Workplace Relations Act 1996 (Cth) was fundamentally altered by the Work Choices system introduced by the Workplace Relations Amendment (Work Choices) Act 2005 which received assent on 14 December 2005 and contained the relevant provisions applicable to AWAs. Agreements no longer needed to be certified and the ‘no disadvantage test’ was abolished. Significant to these proceedings was the introduction of Workplace Relations Amendment (A Stronger Safety Net) Act 2007. Schedule 1 of that amendment introduced a Fairness Test that applied to AWAs (and variations) lodged on or after 7 May 2007. Another important issue is that the test would not apply to AWAs covering employees with full-time (or full-time equivalent) base salaries of $75,000 or more. There is no evidence or submission that suggest that this exemption is relevant to the Employees the subject of these proceedings.
The argument advanced that Mr and Mrs Love were deliberately underpaying and undercutting the Employees cannot be sustained as it was the law that changed and the specialist that they had engaged to assist in the conduct of their business, did not update them. That organisation is not, of course, before me in these proceedings and I hesitate to make findings which may be critical of it.
158.
It was not until October 2007 that Mr and Mrs Love discussed the issue and decided that Mrs Love should request assistance with the changes in respect to AWAs. This was the same time that Mr and Mrs Love received their first rejection of the AWAs lodged in relation to the 22 Employees subject to these proceedings.
It should be noted that the advice on the amended rates to satisfy the Fairness Test was contained in two separate letters of advice (letter 4 and 19 October 2007) because they were experiencing difficulties in obtaining clarification from the Workplace Authority. A further advice was received (22 October 2007) updating casual rates.
159.By October 2007, 16 of the 22 AWAs the subject of these proceedings had already been lodged. I am satisfied that it was not the case that Mr and Mrs Love were deliberately setting about underpaying their staff. The AWA format that they were using was set up in a fundamentally different way to the way in which the award was structured at that time. Those differences are set out in Mr Love’s affidavit at para.22.
160.The benefit of the AWAs for both the company and its employees was that employees could work longer shifts overnight for more than eight hours. Under the award, after the eight hours had been worked, there was a large loading to be paid for overtime and it would be better financially for the company to have stopped the shift at the eight hour point and roster a new employee to finish it. It is in evidence that certain employees had a preference for working an entire overnight shift. However, Mr Love states that he would not have allowed these longer shifts to occur if he had known that the AWA regime he had set up to allow this, would fail. Instead would have rostered two people to undertake the overnight shift in two separate shifts. Consequently, the back-payments would not have been incurred because the shift structures would have been different.
161.Another advantage to staff was the rearrangement of paying people on a Monday to Friday basis which considerably assisted casual staff who were undertaking work for Drymist Holdings as a second source of employment and could be employed on weekend work to supplement their other jobs. The initial AWA regime accommodated this weekend work practice. Mr Love structured the entire payment system and shift structure in a manner to be able to compete in a tendering system that was highly competitive. The amounts that Mr Love tendered for contracts were based on the initial AWA regime that was recommended by his advisors. However, with the introduction of the Fairness Test these contracted rates could no longer be maintained.
162.The argument advanced by the Fair Work Ombudsman was that these contracts should have been renegotiated to reflect the new payment schedules. I accept the submissions made on behalf of Mr and Mrs Love that this represents a naïve or simplistic view of the business arrangements in this industry as a significant number of their clients declined to pursue this course, especially as a number were State and Federal bodies who would have been well aware of the changes in industrial legislation but refused to negotiate.
163.I now turn to an issue of significant concern with the administration of the Fairness Test. This is raised in the affidavit of Mr Love at paras.68 - 73:
68. I attempted to contact the Workplace Authority to discuss making the back-payments but was unable to get a response.
69. In February my administrative staff scanned all wage audit information onto a CD and I spoke to Jason Rhodes regarding the information and sent to him.
70. On 2 March 2009 I received a notice to produce documents by fax and later by mail.
71. I attempted to contact the Workplace Authority on the 1300 number again but was unable to contact the person involved.
72. There was so much confusion by the office staff and myself as there were so many phone calls, faxes, letters and various departments contacting our office that we struggled to keep up with what was happening. There were also regular changes in government department names, forms, and letters that we weren’t sure what was what and where we were up to.
73. Until we were able to speak to someone personally like Karen Theo and Jason Rhodes in Coffs Harbour we had great difficulty in finding out what we were supposed to be doing. As I have said, I contacted the department on a number of occasions as did Meg McNaughton on the business’ behalf, but the communication and assistance provided by the offices was very poor.
164.In the affidavit of Mrs Love, para.28 she states:
During the period from August 2008 to June 2009 I overheard the office staff mentioning that they had received a large number of phone calls from the Workplace Authority office and other representatives. I was working from home at times during this period so the admin staff would ask to take their name and number and pass the message onto either Damien or myself by email. I was told most of the callers hung up without leaving their name or number. Some did leave their name and a 1300 number. Damien mentioned to me at about this time “When I try to call back [the 1300 number] they just tell me it is a large organisation and they would need their location to find the caller as they didn’t know who I am asking for”.
165.
These issues were not specifically addressed by either party in their written or oral submissions. This prompted me to review the documentation in evidence that took place prior to the matter being taken over by Ms Karen Thio and Mr Jason Rhodes, based in the Coffs Harbour Office of the Fair Work Ombudsman. In the documentation available there did not appear to be any reference number or contact officer on any document issued by the Workplace Authority. At the end of the hearing I invited
Mr Mattson to identify, on the relevant correspondence, any reference number or case management officer involved with the assessment of Drymist Holdings’ matters concerning the Fairness Test.
166.The Transcript at page 84 – 86 contains the following exchange:
HIS HONOUR: Good, thank you. Now, can either party help me with this; in an investigation like this, is there a case number allocated?
MR MATTSON: I may have the answer to that, your Honour, if I can just have a moment.
HIS HONOUR: Thank you. Well if you’re looking for it, you might be able to identify the document that it appears on.
MR MATTSON: Yes. Yes, your Honour. Your Honour, I was just looking at the annexure A to the statement of agreed facts to see if that had a reference but it doesn’t appear to be there, so we’re just having a quick look – your Honour, I am instructed that a file number is given to the matter. Would it assist your Honour if we – we don’t appear to be able to readily find that number, but if we forward it to your associate would that be acceptable?
HIS HONOUR: Well I’m particularly interested where it appears on the correspondence. If I pick up any piece of correspondence from the Fair Work Ombudsman or the appropriate previous authority, is there anywhere in their letter that they identify the subject they’re talking about other than the company name?
MR MATTSON: Your Honour, the reference number so far as the Workplace Ombudsman was concerned in this matter was CH08/0369.
HIS HONOUR: And does that appear on any correspondence?
MR MATTSON: Your Honour, I’ve got it on a copy of correspondence which was sent to Clout & Associates, the liquidator.
HIS HONOUR: Yes.
MR MATTSON: But that’s not in evidence.
HIS HONOUR: Is there any correspondence to either of the respondents which identifies a case number?
MR MATTSON: In evidence?
HIS HONOUR: Yes.
MR MATTSON: I don’t think so, your Honour.
HIS HONOUR: Well I go to the next question: is there a case officer appointed for each investigation who is identified in correspondence?
MR MATTSON: Yes there is, your Honour.
HIS HONOUR: And is that a particular officer, or is a notional head? There’s a document signed on page 40, which is “workplace inspector”. Does that person handle all inquiries?
MR MATTSON: Yes, your Honour, in this case, Karen, who was here in court, was the inspector in charge of this investigation.
HIS HONOUR: Yes, and is all ‑ ‑ ‑
MR MATTSON: And there are other inspectors who are in charge of other investigations.
HIS HONOUR: Yes, I understand that, but is all correspondence or telecommunications with that officer direct to that officer or to other people?
MS WILSON: Your Honour, it’s in evidence on the respondent’s behalf that that was not the case. It was – it’s their evidence that after the case officer, Mrs Theo, was appointed to this case that it became much easier to correspond with the Workplace Authority, but before that time that they were just calling a 1300 number and trying to get hold of somebody to return their calls when they came back to the office with a missed call. And in that regard, I refer your Honour to the affidavit of Damien Love at paragraph 71 to 78.
HIS HONOUR: Yes, on – thank you, and ‑ ‑ ‑
MR MATTSON: Your Honour, I – sorry to interrupt, your Honour. I can only comment on the Fair Work Ombudsman, which was prior to the Workplace Ombudsman, which is the entity that’s instructing us and involved in this matter.
HIS HONOUR: Yes, but I presume that the practice is similar between the two offices.
MR MATTSON: Between the Workplace Ombudsman and the Fair Work Ombudsman? Yes, their practices are similar.
HIS HONOUR: So any discussion with any officer on the phone, is the officer identified by full name?
MR MATTSON: Yes, your Honour.
HIS HONOUR: And that would apply to all officers?
MR MATTSON: Yes, your Honour.
HIS HONOUR: And is there any correspondence by email?
MR MATTSON: Yes, your Honour.
HIS HONOUR: And is that fully identified with a case number or the case officer’s name?
MR MATTSON: Your Honour, it would identify the case officer being the person sending the email. The email may or may not identify the case number in the subject heading.
HIS HONOUR: Right.
MS WILSON: And, your Honour, on behalf of the respondents I’m instructed that they were – that each time they spoke to an officer on the telephone that they were not informed of their full name at that time, and the messages that they received in the office did not contain names, they just had a 1300 number to call back, and I have a whole folder but I can’t put it into evidence now, your Honour, of the notifications in regards to these 22 employees, and none of which are signed by a person. Just a standard – the closure of the letter is:
Workplace Authority Director.
With no signature, just ‑ ‑ ‑
HIS HONOUR: And does that identify anything other than the name of the company on it?
MS WILSON: It says:
Attention: Tammy Love.
But it doesn’t actually refer to Drymist Holdings Proprietary Limited, who was the employer. It says:
Tammy Love, the trustee for Love Family Trust.
MR MATTSON: Your Honour, I think everyone’s at cross-purposes here. Your Honour, I’m answering questions in relation to the Workplace Ombudsman ‑ ‑ ‑
HIS HONOUR: Yes.
MR MATTSON: ‑ ‑ ‑ of the Fair Work Ombudsman. My friend is talking about the Workplace Authority and their practices. They are a separate body. Now, if the questions are relating to that then my answers may be very different, if I am able to answer that. I’m answering it in respect of the Workplace Ombudsman, the Fair Work Ombudsman.
HIS HONOUR: Yes, I understand that. I’m just trying to clarify how correspondence and communications between any individual in the community and those particular offices occurs and are the officers appropriately identified, or is the correspondence appropriately marked with the investigation or is it purely by company name.
MR MATTSON: And so far as that concerns your Honour, the Workplace Ombudsman, or now the Fair Work Ombudsman, it is done by the particular case officer, dealing with them directly and making themselves known. That is by communication directly by the subject matter, and there may or may not be a reference number in some of the correspondence.
167.
I believe that this issue is extremely significant in this prosecution. New legislation is introduced with an element of retrospectivity. The authority that is charged with its introduction and administration appears to be unable to give clear precise and helpful instructions as to the implementation and operation of critical provisions which, if not precisely met, can result in prosecution with catastrophic effects on some small businesses. The Respondents in this case clearly fall into this category. Immediately upon recognition that the employment practices that they were pursuing was in breach of the law, they sought advice from their advisors as to what steps they should take.
The difficulty that the independent advisor is also experiencing in the implementation of this legislation is clearly demonstrated in their correspondence to Mr and Mrs Love, dated 4 October 2007. That letter states:
I have reviewed the rates of pay applicable under the Australian Workplace Agreements which have been lodged since 7 May 2007. Unfortunately, it is extremely difficult to understand how the Workplace Authority assesses whether an agreement passes the Fairness Test.
It is clear however that the rates payable under the current ECI AWAs will not pass the Fairness Test, as we set the rates in accordance with the legislation which applied in 2006, when the AWAs were drafted. The legislation allowed us to minimise or avoid altogether the shift loadings and penalties payable for evening/night work, Saturday and Sunday work, and work on public holidays.
The legislation introducing the Fairness Test was only made in July, even though it applies to agreements made from 7 May 2007 onward. It assesses the rate of pay to ensure employees receive payment for penalty rates, shift loadings and annual leave loadings, either directly, or in a higher average hourly rate.
…
The Workplace Authority does not release information on how to calculate the correct rate to satisfy the Fairness Test, so it is difficult to advise on any appropriate average rate of pay for the span of hours from Monday to Saturday, 6am – 8pm. I have estimated a rough amount, assuming an even split of days worked, so the same number of week days and Saturdays are worked on average.
168.The advice letter then proceeds to set out a method that is required to satisfy the Workplace Authority in respect to new AWAs being lodged. The advice states:
1. Forward the following information to the Workplace Authority as attached in the request for additional information form.
2. The Workplace Authority will then respond, advising that the AWAs does not pass the Fairness Test and advise the rate of pay required in order to pass the Fairness Test.
3. Review this rate and confirm if it is reasonable or not. If it is not based on the attached spreadsheets, we can request a review of the calculations.
4. If it is reasonable, provide an undertaking to the employees and the Workplace Authority that you will pay the nominated rate and provide back-pay.
5. Write immediately to employees advising them of what is happening and then advise them as matters change.
169.As has been demonstrated in this matter the advice forthcoming from the Workplace Authority took up to 14 months in respect of the 22 Employees subject to this prosecution, with average assessment time of 11.6 months.
170.
Added to this administrative pattern, when the small business operator attempts to contact the Authority for advice, it is difficult to speak to or even contact the same person and if contact is made, it is even more difficult to reconnect with the previous person spoken to. It is for this reason that this series of questions were addressed to the parties requesting to identify any correspondence between the Authority and their business which identified the parties with a file number or a contact person.
I readily acknowledge that once the decision to prosecute had been made, then a contact person was identified, however, unfortunately for the small business operator attempting to satisfy the legislation and comply with its requirements, this was fatally too late.
171.The administration and management of these practical applications of the legislation are totally incompatible with the objectives of the Act which state:
3. Principal object
The principal object of this Act is to provide a framework for cooperative workplace relations which promotes the economic prosperity and welfare of the people of Australia by:
(a) encouraging the pursuit of high employment, improved living standards, low inflation and international competitiveness through higher productivity and a flexible and fair labour market; and
(b) establishing and maintaining a simplified national system of workplace relations; and
(c) providing an economically sustainable safety net of minimum wages and conditions for those whose employment is regulated by this Act; and
(d) ensuring that, as far as possible, the primary responsibility for determining matters affecting the employment relationship rests with the employer and employees at the workplace or enterprise level; and
(e) enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances; and
(f) ensuring compliance with minimum standards, industrial instruments and bargaining processes by providing effective means for the investigation and enforcement of:
(i) employee entitlements; and
(ii) the rights and obligations of employers and employees, and their organisations; and
(g) ensuring that awards provide minimum safety net entitlements for award‑reliant employees which are consistent with Australian Fair Pay Commission decisions and which avoid creating disincentives to bargain at the workplace level; and
(ga) establishing a process for making modern awards; and
(h) supporting harmonious and productive workplace relations by providing flexible mechanisms for the voluntary settlement of disputes; and
(i) balancing the right to take industrial action for the purposes of collective bargaining at the workplace level with the need to protect the public interest and appropriately deal with illegitimate and unprotected industrial action; and
(j) ensuring freedom of association, including the rights of employees and employers to join an organisation or association of their choice, or not to join an organisation or association; and
(k) protecting the competitive position of young people in the labour market, promoting youth employment, youth skills and community standards and assisting in reducing youth unemployment; and
(l) assisting employees to balance their work and family responsibilities effectively through the development of mutually beneficial work practices with employers; and
(m) respecting and valuing the diversity of the work force by helping to prevent and eliminate discrimination on the basis of race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin; and
(n) assisting in giving effect to Australia's international obligations in relation to labour standards.
172.There are a large number of authorities which clearly state that ignorance of the law is not a defence. However, if the administering authority is unable to explain the operation of the legislation or declines to reveal the process of assessment of the Fairness Test to a small business or their advisors, the possibility of compliance is made even more difficult.
Determination of penalty
173.Section 346E(1) of the WR Act requires the Workplace Authority Director to decide whether individual AWAs pass the Fairness Test, pursuant to s.346M. Section 346M(1)(a) of the WR Act states that an AWA is deemed to have passed the Fairness Test if the Workplace Authority Director was satisfied that the AWA provided fair compensation to an employee in lieu of the exclusion or modification of protected award conditions that apply to the employee. In respect of the AWAs for each of the 22 Employees who are the subject of these proceedings, the Workplace Authority Director determined that the AWAs failed to provide fair compensation for the removal or modification of protected conditions.
174.In these circumstances, s.346R(3) of the WR Act requires a variation to be filed for each Employee that is subject to the notification of a failure to satisfy the Fairness Test. If a variation is not filed within the specified period, s.346R(3) establishes that the AWA ceases to act. Paragraph 15 of the Statement of Agreed Facts indicates that Mrs Love, on 27 October 2007, lodged on behalf of Drymist Holdings an undertaking to vary Messrs Nichols and Watts’ AWAs. On 15 August 2008, Mrs Love was advised that the variations lodged in respect of Nichols and Watt had failed the Fairness Test. In respect of the other 20 Employees, no variation was lodged and the AWAs ceased to operate within 14 days of notification in accordance with s.346R(3).
175.Ultimately, each of the 22 Employees were entitled to compensation payable under s.346ZD for the “Fairness Test” period, being the period commencing on the date of the lodgement of the AWAs and ending on the date that the AWAs ceased to operate in accordance with s.346R(3). Mr and Mrs Love have admitted in the Statement of Agreed Facts at paras.20, 31, 41, and 61 that Drymist Holdings did not pay the required compensation to each of those Employees and that all such compensation remains outstanding. For the purposes of s.719 of the WR Act, each breach of each separate obligation found in the WR Act in relation to the Employees is a separate contravention: Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223; McIver v Healey [2008] FCA 425 per Marshall J at [16]. Clearly, in this matter there were 22 separate stand-alone AWAs which were lodged with the Workplace Authority. In respect of 20 of those AWAs, Mr and Mrs Love have admitted that no variation was lodged and when the operation of each individual AWA ceased, no back-payment was made. In the other two cases (Nichols & Watt) variations were lodged but ultimately failed. It is acknowledged that no further variation was lodged for these two AWAs and when they, in turn, ceased to operate under the provisions of the Act, there was no payment of back-pay made.
176.The material before the Court is limited, however it appears that Mr and Mrs Love adopted two separate courses of action in respect of failed AWAs:
a)In January 2008, Mr Love received notification that nine AWAs failed to pass the Fairness Test. Seven of these employees were back-paid while two others had received more under the AWA than they would have received under the Award and consequently received no payment (affidavit of Mr Love, para.48). In March 2008, notification was received that the AWA relating to Glen Kearns had passed the Fairness Test.
b)The 22 Employees that are the subject of these proceedings, notification was received that their respective AWAs had failed the Fairness Test, either initially or on variation and became subject to the operation of s.346R(3) and ceased to operate. In all 22 cases, no back-payment of wages was made.
177.No explanation for the failure to back-pay the 22 Employees subject to these proceedings has been advanced. In some cases, the amount is quite small being $71.67, and up to substantial figures of $10,355.80. Regardless of the reason for this failure to meet the payment, they were simply not paid.
178.
Drymist Holdings breached s.346ZD of the WR Act by failing to pay the required compensation to each of the Employees on or before the respective due date on 5 separate occasions. The Fair Work Ombudsman submits that on each occasion a separate decision was made by Drymist Holdings to not pay the compensation. Mr and Mrs Love have accepted there were five separate contraventions. Mr Love admitted at para.72 and
Mrs Love at para.74 of the Statement of Agreed Facts admits that they were each individually involved in the contravention of Drymist Holdings within the meaning of s.728 of the WR Act. Consequently, in accordance with s.719(4) of the WR Act, the maximum penalty imposed under s.719(1) for a breach of an applicable provision is 60 penalty units for an individual (i.e. $6,600). As five contraventions have been admitted, the maximum penalty for both Mr and Mrs Love is $33,000 each. In Cotis v Pow Juice (supra) at [37], I considered what a respondent is required to establish a single course of conduct. In that decision I stated:
[37] If the respondent wishes to establish that multiple breaches of an applicable provision arises out of a course of conduct by it and is therefore a single breach, then unless there is clear and unequivocal evidence of such a course of conduct, it is encumbered upon the respondent to lead evidence in support before this Court can be satisfied: Amieu v Menelang Station (1987) 16 IR 245.
179.No submissions of this nature have been advanced on behalf of Mr and Mrs Love.
180.In applying the ‘totality principle’ I am guided by the decision in Australian Ophthalmic Supplies Pty Ltd v McAlery-Smith (supra) per his Honour Gray J at [27] where he states:
[27] In determining the appropriate penalty for myself, I take a different approach from that taken by Buchanan J. His Honour at [112] has applied an approach that fixes a penalty for each category of breach at a figure that results in an aggregate sum that, in his Honour’s view, does not offend against the totality principle. My approach is more like that of Graham J, who, at [78] and [80], has accepted the magistrate’s aggregate of $88,000, but has determined by the application of the totality principle an appropriate overall penalty. In other words, Graham J and I proceed by what the High Court has called “instinctive synthesis”. See Markarian v R [2005] HCA 25; (2005) 228 CLR 357 at [37], where the majority approved what was said by Gaudron, Gummow and Hayne JJ in Wong v R [2001] HCA 64; (2001) 207 CLR 584 at [74]–[76].
and his Honour Graham J at [55] and [78]:
[55] The acceptance of the role of instinctive synthesis in the judicial sentencing process is not opposed to the concern for predictability and consistency in sentencing that underpins the rule of law and public confidence in the administration of criminal justice. The synthesising task is conducted after a full and transparent articulation of the relevant considerations including an indication of the relative weight to be given to those considerations in the circumstances of the particular case (per McHugh J in Markarian v R at [84]).
…
[78] Accepting as correct the numerous findings made by the learned Magistrate in respect of the considerations which she took into account as relevant to the determination of the amounts of the penalties to be imposed, I consider that the question whether the aggregate of $88,000 was just and appropriate should be answered in the negative. Applying an ‘instinctive synthesis’ approach, as explained by McHugh J in Markarian v R, I would incline to the view that the aggregate figure was an inappropriate response to the conduct which led to the 22 breaches of the relevant Awards.
181.The final aspect concerns whether the Court should apply a principle of totality in this matter so that Mr and Mrs Love are not subject to multiple penalties for breaches which have an interlocutory relationship that arise out of a single action: BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union (CFMEU) [2000] FCA 1908 at [8]; Transport Workers Union of Australia v Glynburn Contractors (Salisbury) Pty Ltd (1991) 37 IR 313 at 314. Neither Counsel made significant submissions on this issue nor pressed for an acceptance or rejection of it. Clearly, five contraventions have been admitted and five penalties should be applied. There is no direct evidence in the form of affidavit material or oral statements made in evidence-in-chief or cross-examination as to why some AWAs that failed the Fairness Test were back-paid and others were not.
182.I do accept that due to the change in circumstances by the introduction of the Fairness Test, together with the increase in the base rates for all awards that followed shortly after, placed this small business into a difficult financial position. It can only be assumed that if a small businessman takes the decision to cease trading and place his business into voluntary liquidation that the financial viability of the operation is dire. Prior to taking this action, a further cash injection of $72,000 of their personal funds had been placed into the business, together with rationalisation of a number of their personal assets, including their home, must lead to an inference as to the financial position of their business operation.
183.Strong arguments have been advanced by the Fair Work Ombudsman that the decision not to meet these liabilities that arose by the failure of the AWAs to meet the Fairness Test was intentional and deliberate. I do not accept that argument as the bulk of the AWAs that failed the Fairness Test and that became the subject of these proceedings were prepared well before consequences of that test became apparent. The second strong argument made against Mr and Mrs Love was that they were receiving a strong cash flow from various sources including the period after placing the company into administration which would have provided them with sufficient resources to meet these payments.
184.In support of this argument, a detailed timeline of events were tendered which I have analysed using the material in evidence. Significantly, the operating bank accounts of Drymist Holdings, which appear to be within the parameters of the subpoenas issued to Mr and Mrs Love, do not appear in the documents tendered to the Court. There is complete silence as to why this material does not appear.
185.Mr and Mrs Love’s joint bank account indicates the receipt of various payments nominated in the timeline but at the same time there is the normal expenditure expected of a married couple with two children to meet normal domestic requirements. The account does not demonstrate that they were holding surplus funds that could be further ploughed back into the business, other than the $72,000 that was transferred in October 2008. As this was not used to provide back-payments owing of a similar amount, it must be assumed that it was expended on other operating activities of Drymist Holdings.
186.Taking into consideration each aspect that is raised in Pangaea (see above) together with consideration of the objective seriousness of the conduct not to pay the back-pay liability when it arose, the issue of deterrence and mitigating factors (as discussed above) I have formed the view that the magnitude of the penalty should be considerably reduced.
187.In the case of Mr Love, who was the architect of the establishment of the business, who promoted its development and expansion and was the controlling mind of the small business, he must take the substantial blame for the termination of the business which resulted in the failure to meet the financial liability of non-payment of the Employee’s entitlements. However, his personal loss is significant as the failure of the business has resulted in him having his venture destroyed and the likelihood of reestablishment in a new venture is remote. This is linked with the loss of his home, his loss of standing in a small community and being forced to pursue retraining in an attempt to provide an occupation to support his family. It is difficult to see that he has received any benefit from this business failure. In the circumstances, the penalty against Mr Love should be reduced to $6,000.00.
188.In the case of Mrs Love, her role in the business of Drymist Holdings did not appear initially to be substantial, but as the operation came under more financial stress, she stepped in to assist. Although this occurred, her role appears to have been to attend to delegated tasks. Clearly, the ramifications of the business failure also resulted in a significant loss, similar to her husband, but she was partly buffered by her own business activities. In the circumstances, the penalty against Mrs Love should be reduced to $1,000.00.
189.
In the case of both Mr and Mrs Love I have applied a further discount for the early admission of liability and the avoidance of a contested hearing. They have expressed deep regret for what has occurred and have suffered badly because of these events.
I also believe that much of this unfortunate situation could have been avoided if the implementation of this particular piece of legislation was more effectively handled by the government instrument delegated with that responsibility, by providing more guidance and direction, particularly to the small business sector.
I certify that the preceding one hundred and eighty-nine (189) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM
Date: 31 August 2011.
Annexure “A” - Length of Delay in Notification Employee Date AWA Lodged Failure Notice Delay (months) 1 Jaqueline Axisa 4-Apr-08 2-Dec-08 8 2 Dale Bremner 17-Jul-07 11-Sep-08 14 3 John Bucknall 10-Aug-07 11-Sep-08 13 4 Jeffrey Catt 10-Aug-08 11-Sep-08 13 5 Justin Cowles 17-Jul-07 11-Sep-08 14 6 Wade Folington 17-Jul-07 11-Sep-08 14 7 Christine Hewson 10-Sep-07 29-Sep-08 12.5 8 Warwick Jansen 30-Jan-08 7-May-08 3.5 9 Ian Jolley 9-Apr-08 2-Dec-08 8 10 Luke Knight 20-Aug-07 11-Sep-08 13 11 Victor Mathieson 17-Jul-07 11-Sep-08 14 12 Gary McBeath 17-Jul-07 11-Sep-08 14 13 Lance Mortimer 17-Jul-08 11-Sep-08 14 14 Craig Nicols 6-Jun-07 15-Aug-08 14 15 Peter O'Rourke 17-Sep-07 29-Sep-08 12.5 16 Shane Ottery 17-Sep-07 29-Sep-08 12.5 17 Stephen Rixon 17-Jul-07 11-Sep-08 14 18 Sarah Robertson 9-Apr-08 2-Dec-08 8 19 Gordon Stewart 11-Jan-08 5-May-08 4 20 Bryan Thompson 4-Apr-08 8-Dec-08 8 21 Stephen Watson 10-Aug-07 11-Sep-08 13 22 Brian Watt 22-Jun-07 15-Aug-08 14 Longest Delay 14 months Shortest delay 3.5 months Average delay 11.6 months
| Annexure “B” - Statement of Claim | ||||||||||||||
| Column 1 | Column 2 | Column 3 | Column 4 | Column 5 | Column 6 | Column 7 | ||||||||
| Employees | Lodgement Date | Failed test letter | AWA Ceased | Shortfall | Payment by | |||||||||
| 2(c) | (Safety Net Act) | 15(a) | (Transitional Schedule 7A) | 16(a) | Date | 20___ | Date | 22(a) | $ | 26(a) | Date | 27__ | ||
| 1 | Jaqueline Axisa | (i) | 4-Apr-08 | (i) | 2-Dec-08 | (s) | 16-Dec-08 | (xix) | 1,230.43 | (xix) | 28-Dec-08 | (s) | ||
| 2 | Dale Bremner | (ii) | 17-Jul-07 | (iii) | 11-Sep-07 | (c) | 25-Sep-08 | (iii) | 1,599.72 | (iii) | 9-Oct-08 | (c) | ||
| 3 | John Bucknall | (iii) | 10-Aug-07 | (x) | 11-Sep-07 | (j) | 25-Sep-08 | (x) | 5,333.70 | (x) | 9-Oct-08 | (j) | ||
| 4 | Jeffrey Catt | (iv) | 10-Aug-07 | (xi) | 11-Sep-07 | (k) | 25-Sep-08 | (xi) | 99.37 | (xi) | 9-Oct-08 | (k) | ||
| 5 | Justin Cowles | (v) | 17-Jul-07 | (iv) | 11-Sep-07 | (d) | 25-Sep-08 | (iv) | 7,991.41 | (iv) | 9-Oct-08 | (d) | ||
| 6 | Wade Folington | (vi) | 17-Jul-07 | (v) | 11-Sep-07 | (e) | 25-Sep-08 | (v) | 2,738.48 | (v) | 9-Oct-08 | (e) | ||
| 7 | Christine Hewson | (vii) | 10-Sep-07 | (xiv) | 29-Sep-07 | (n) | 13-Oct-08 | (xiv) | 1,548.77 | (xiv) | 27-Oct-08 | (n) | ||
| 8 | Warwick Jansen | (viii) | 30-Jan-08 | (xviii) | 7-May-07 | (r) | 21-May-08 | (xviii) | 1,797.34 | (xviii) | 4-Jun-08 | (r) | ||
| 9 | Ian Jolley | (ix) | 9-Apr-08 | (iii) | 2-Dec-08 | (u) | 16-Dec-08 | (xxi) | 645.45 | (xxi) | 30-Dec-08 | (u) | ||
| 10 | Luke Knight | (x) | 20-Aug-07 | (xiii) | 11-Sep-07 | (m) | 25-Sep-08 | (xiii) | 1,965.28 | (xiii) | 9-Oct-08 | (m) | ||
| 11 | Victor Mathieson | (xi) | 17-Jul-07 | (vi) | 11-Sep-07 | (f) | 25-Sep-08 | (vi) | 8,817.44 | (vi) | 9-Oct-08 | (f) | ||
| 12 | Gary McBeath | (xii) | 17-Jul-07 | (vii) | 11-Sep-07 | (g) | 25-Sep-08 | (vii) | 169.70 | (vii) | 9-Oct-08 | (g) | ||
| 13 | Lance Mortimer | (xiii) | 17-Jul-07 | (viii) | 11-Sep-07 | (gh) | 25-Sep-08 | (viii) | 6,465.22 | (viii) | 9-Oct-08 | (h) | ||
| 14 | Craig Nicols | (xiv) | 6-Jun-07 | (i) | 8-Sep-07 | (a) | 15-Aug-08 | (i) | 505.34 | (i) | 29-Aug-08 | (a) | ||
| 15 | Peter O'Rourke | (xv) | 17-Sep-07 | (xv) | 29-Sep-07 | (o) | 13-Oct-08 | (cv) | 4,635.52 | (xx) | 27-Oct-08 | (o) | ||
| 16 | Shane Ottery | (xvi) | 17-Sep-07 | (xxi) | 29-Sep-07 | (p) | 13-Oct-08 | (cvi) | 5,099.65 | (xvi) | 27-Oct-08 | (p) | ||
| 17 | Stephen Rixon | (xvii) | 17-Jul-07 | (ix) | 11-Sep-07 | (i) | 25-Sep-08 | (ix) | 7,266.84 | (ix) | 9-Oct-08 | (i) | ||
| 18 | Sarah Robertson | (xviii) | 9-Apr-08 | (iv) | 2-Dec-08 | (v) | 16-Dec-08 | (xxii) | 71.67 | (xxii) | 30-Dec-08 | (v) | ||
| 19 | Gordon Stewart | (xix) | 10-Jan-08 | (xvii) | 5-May-07 | (q) | 19-May-08 | (xvii) | 2,844.44 | (xvii) | 2-Jun-08 | (q) | ||
| 20 | Bryan Thompson | (xx) | 4-Apr-08 | (ii) | 8-Dec-08 | (t) | 22-Dec-08 | (xx) | 602.79 | (xx) | 5-Jan-09 | (t) | ||
| 21 | Stephen Watson | (xxi) | 10-Aug-07 | (xii) | 11-Sep-07 | (l) | 25-Sep-08 | (xii) | 2,646.59 | (xii) | 9-Oct-08 | (l) | ||
| 22 | Brian Watt | (xxii) | 22-Jun-07 | (ii) | 8-Sep-07 | (b) | 15-Aug-08 | (ii) | 10,355.80 | (ii) | 29-Aug-08 | (b) | ||
Annexure “C” - Statement of Agreed Facts Employee Contravention 1 Contravention 2 Contravention 3 Contravention 4 Contravention 5 para.20 para.31 para.41 para.51 para.61 1 Jaqueline Axisa $1,230.43 (a) 2 Dale Bremner $1599.72 (c) 3 John Bucknall $5,333.70 (j) 4 Jeffrey Catt $99.37 (k) 5 Justin Cowles $7,991.41(d) 6 Wade Folington $2,738.48 7 Christine Hewson $1,548.77 (n) 8 Warwick Jansen $1,797.34 9 Ian Jolley $645.45 (c) 10 Luke Knight $1,965.59 (m) 11 Victor Mathieson $8,817.44 (f) 12 Gary McBeath $169.76 (g) 13 Lance Mortimer $6,465.22 (h) 14 Craig Nicols $506.34 (a) 15 Peter O'Rourke $4,635.52 (o) 16 Shane Ottery $5,099.65 (p) 17 Stephen Rixon $7,266.84 (i) 18 Sarah Robertson $71.67 (d) 19 Gordon Stewart $2,844.44 20 Bryan Thompson $602.79 21 Stephen Watson $2,646.59 (l) 22 Brian Watt $10,355.86 (b) Annexure “D” DAMIEN LOVE TAMMY LOVE Company Name Registered Status Shareholding Shareholding Purpose/Function Director Secretary Beneficial/Fully Paid Director Secretary Beneficial/Fully Paid Datajaz Pty Ltd 29/08/2007 App 29/08/2007 29/08/2007 1 Share App 29/08/2007 29/08/2007 1 Share ACN 127279663 Superannuation Trustee Co. Drymist Pty Ltd 15/04/1999 App 15/04/1999 15/04/1999 1 Share 1 Share ACN 087068988 Drymist Holdings Pty Ltd 25/11/2004 Ceased operating App 25/11/2004 25/11/2004 1 Share 1 Share ACN 111957049 1/06/2009 Operated ECI Security Admin 21/08/2009 Eastcoast Investigations Pty Ltd (ECI) 29/02/2007 Sold App 29/02/2007 9/02/2007 1 Share 1 Share ACN 123874868 Platinum Leisure Pty Ltd 28/05/2008 1 Share 4/06/2009 4/06/2009 1 Share ACN 131316428 Used for armed hold-up training Not trading
0
40
5